10-Q
Citigroup Inc (C)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|---|
For the quarterly period ended September 30, 2023
OR
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|---|
For the transition period from to
Commission file number 1-9924
Citigroup Inc.
(Exact name of registrant as specified in its charter)
| Delaware | 52-1568099 | ||
|---|---|---|---|
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||
| 388 Greenwich Street, | New York | NY | 10013 |
| (Address of principal executive offices) | (Zip code) |
(212) 559-1000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934 formatted in Inline XBRL: See Exhibit 99.01
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☒ | Accelerated filer | ☐ | Non-accelerated filer | ☐ | Smaller reporting company | ☐ |
|---|---|---|---|---|---|---|---|
| Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Number of shares of Citigroup Inc. common stock outstanding on September 30, 2023: 1,913,881,933
Available on the web at www.citigroup.com
CITIGROUP’S THIRD QUARTER 2023—FORM 10-Q
| OVERVIEW | 1 |
|---|---|
| MANAGEMENT’S DISCUSSION AND <br>ANALYSIS OF FINANCIAL CONDITION AND <br>RESULTS OF OPERATIONS | 4 |
| Executive Summary | 4 |
| Summary of Selected Financial Data | 8 |
| Segment Revenues and Income (Loss) | 10 |
| Segment Balance Sheet | 11 |
| Institutional Clients Group | 12 |
| Personal Banking and Wealth Management | 16 |
| Legacy Franchises | 19 |
| Corporate/Other | 22 |
| CAPITAL RESOURCES | 23 |
| MANAGING GLOBAL RISK TABLE OF <br>CONTENTS | 37 |
| MANAGING GLOBAL RISK | 38 |
| SIGNIFICANT ACCOUNTING POLICIES AND <br>SIGNIFICANT ESTIMATES | 79 |
| DISCLOSURE CONTROLS AND <br>PROCEDURES | 84 |
| DISCLOSURE PURSUANT TO SECTION 219 OF <br>THE IRAN THREAT REDUCTION AND SYRIA <br>HUMAN RIGHTS ACT | 84 |
| FORWARD-LOOKING STATEMENTS | 85 |
| FINANCIAL STATEMENTS AND NOTES <br>TABLE OF CONTENTS | 89 |
| CONSOLIDATED FINANCIAL STATEMENTS | 90 |
| NOTES TO CONSOLIDATED FINANCIAL <br>STATEMENTS (UNAUDITED) | 98 |
| UNREGISTERED SALES OF EQUITY SECURITIES, <br>REPURCHASES OF EQUITY SECURITIES AND <br>DIVIDENDS | 212 |
| OTHER INFORMATION | 213 |
| GLOSSARY OF TERMS AND ACRONYMS | 215 |
OVERVIEW
This Quarterly Report on Form 10-Q should be read in conjunction with Citigroup’s Annual Report on Form 10-K for the year ended December 31, 2022 (referred to herein as Citi’s 2022 Form 10-K), Citigroup’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2023 (First Quarter of 2023 Form 10-Q) and Citigroup’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2023 (Second Quarter of 2023 Form 10-Q).
Throughout this report, “Citigroup,” “Citi” and “the Company” refer to Citigroup Inc. and its consolidated subsidiaries. All “Note” references correspond to the Notes to the Consolidated Financial Statements herein, unless otherwise indicated.
For a list of certain terms and acronyms used in this Quarterly Report on Form 10-Q and other Citigroup presentations, see “Glossary of Terms and Acronyms” at the end of this report.
Additional information about Citigroup is available on Citi’s website at www.citigroup.com. Citigroup’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and proxy statements, as well as other filings with the U.S. Securities and Exchange Commission (SEC) are available free of charge through Citi’s website by clicking on “SEC Filings” under the “Investors” tab. The SEC’s website also contains these filings and other information regarding Citi at www.sec.gov.
Please see “Risk Factors” in Citi’s 2022 Form 10-K for a discussion of material risks and uncertainties that could impact Citigroup’s businesses, results of operations and financial condition.
Non-GAAP Financial Measures
Citi prepares its financial statements in accordance with U.S. generally accepted accounting principles (GAAP) and also presents certain non-GAAP financial measures (non-GAAP measures) that exclude certain items or otherwise include components that differ from the most directly comparable measures calculated in accordance with U.S. GAAP. Non-GAAP measures are provided as additional useful information to assess Citi’s financial condition and results of operations, including providing an additional meaningful depiction of underlying fundamentals of period-to-period operating results. These non-GAAP measures are not intended as a substitute for GAAP financial measures and may not be defined or calculated the same way as non-GAAP measures with similar names used by other companies.
Citi’s non-GAAP financial measures in this Form 10-Q include:
•Results excluding divestiture-related impacts
•Tangible common equity (TCE), return on tangible common equity (RoTCE) and tangible book value per share (TBVPS)
•Banking and Corporate lending revenues excluding gains (losses) on loan hedges
•Non-ICG Markets net interest income
Citi’s results excluding divestiture-related impacts represent as reported, or GAAP, financial results adjusted for items that are incurred and recognized, which are wholly and necessarily a consequence of actions taken to sell (including through a public offering), dispose of or wind down business activities associated with Citi’s announced 14 exit markets. For additional information on results excluding divestiture-related impacts, see “Executive Summary” and “Legacy Franchises” below.
For more information on TCE, RoTCE and TBVPS, see “Capital Resources—Tangible Common Equity, Book Value Per Share, Tangible Book Value Per Share and Return on Equity” below.
For more information on Banking and Corporate lending revenues excluding gains (losses) on loan hedges, see “Executive Summary” and “Institutional Clients Group” below.
For more information on non-ICG Markets net interest income, see “Market Risk—Non-ICG Markets Net Interest Income” below.
As of September 30, 2023, Citigroup was managed pursuant to three operating segments—Institutional Clients Group, Personal Banking and Wealth Management and Legacy Franchises—across four regions. Activities not assigned to the operating segments were included in Corporate/Other.
For a further description of the operating segments and the products and services they provided, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 3 to the Consolidated Financial Statements below. The results for the four regions in which Citigroup operated as of September 30, 2023 were fully reflected in the operating segments and Corporate/Other.
Planned Revision to Operating Model and Financial Reporting Structure
As part of Citi’s overall simplification, Citi previously disclosed that as of the fourth quarter of 2023 it will be making changes to its operating model to simplify the Company and further align its organizational structure with its business strategy.
Citi’s new operating model includes the elimination of the ICG, PBWM and Legacy Franchises operating segments and will result in five new reportable operating segments—Services, Markets, Banking, Wealth and U.S. Personal Banking—and a new financial reporting structure, effective as of the end of the fourth quarter of 2023. Activities not assigned to the reportable operating segments will be included in a new All Other category, which will consist of Legacy Franchises and Corporate/Other, as outlined below.
Citi will also consolidate its regional structure from four to two regions, consisting of North America and a newly created international group. Citi expects to incur charges through the first half of 2024 as additional phases of its overall simplification initiatives are finalized and implemented. For additional information on expenses, see “Executive Summary—Expenses” below.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
EXECUTIVE SUMMARY
Third Quarter of 2023—Results Demonstrated Strength of Diversified Business Model and Progress Toward Priorities
As described further throughout this Executive Summary, during the third quarter of 2023:
•Citi’s revenues increased 9% versus the prior-year period. Excluding divestiture-related impacts (see “Legacy Franchises” below), revenues increased 10%, driven by higher net interest income and non-interest revenues.
•Citi’s expenses increased 6% versus the prior-year period, both on a reported basis and excluding divestiture-related impacts (see “Legacy Franchises” below), largely driven by continued investments in risk and controls, the impacts of inflation and severance. The increase was partially offset by productivity savings and expense reductions from the exited markets and continued wind-downs (see “Expenses” below).
•Citi’s cost of credit was $1.8 billion versus $1.4 billion in the prior-year period. The increase was primarily driven by the ongoing normalization in net credit losses and volume growth in Branded cards and Retail services in PBWM.
•Citi returned $1.5 billion to common shareholders in the form of dividends and share repurchases.
•Citi’s Common Equity Tier 1 (CET1) Capital ratio under the Basel III Standardized Approach increased to 13.6% as of September 30, 2023, compared to 12.3% as of September 30, 2022 (see “Capital Resources” below). This compares to Citi’s required regulatory CET1 Capital ratio of 12.3% as of October 1, 2023 under the Basel III Standardized Approach.
•Citi continued to make progress on its consumer banking business divestitures in the third quarter of 2023, including the closing of its Taiwan sale transaction and working toward the closing of its Indonesia sale transaction in the fourth quarter of 2023. (For additional information on the progress of Citi’s other exits and wind-downs, see “Legacy Franchises” below.)
•As previously disclosed, Citi announced it will be making changes to its operating model to simplify the Company and further align its organizational structure with its business strategy. This new operating model will elevate the leaders of Citi’s five key businesses and eliminate management layers, and reflect the next step in Citi’s work to implement its strategic and other initiatives. For additional information, see “Planned Revision to Operating Model and Financial Reporting Structure” above.
Third Quarter of 2023 Results Summary
Citigroup
Citigroup reported net income of $3,546 million in the current quarter, up 2%, compared to net income of $3,479 million in the prior-year period, or $1.63 per share, unchanged from the prior-year period. The net income increase was driven by the higher revenues, partially offset by the higher expenses, the higher cost of credit and a higher effective tax rate. Citigroup’s effective tax rate was 25% versus 20% in the prior-year period, largely driven by the geographic mix of earnings in the current quarter (see “Income Taxes” below).
Results for the third quarter of 2023 included divestiture-related impacts of $299 million in earnings before taxes ($214 million after-tax). See “Legacy Franchises” below for details about the divestiture-related impacts. These divestiture-related impacts, collectively, had a $0.11 beneficial impact on earnings per share (EPS) in the current quarter. Excluding these divestiture-related impacts, EPS was $1.52. (As used throughout this Form 10-Q, Citi’s results of operations and financial condition excluding divestiture-related impacts are non-GAAP financial measures.)
Results for the third quarter of 2022 included divestiture-related impacts of $519 million in earnings before taxes ($256 million after-tax). See “Legacy Franchises” below for details about the divestiture-related impacts. These divestiture-related impacts, collectively, had a $0.13 beneficial impact on EPS in the prior-year period. Excluding these divestiture-related impacts, EPS was $1.50.
Citigroup revenues of $20.1 billion in the third quarter of 2023 increased 9% on a reported basis, and 10% excluding divestiture-related impacts versus the prior-year period. The increase in revenues reflected strength across Services and Markets in Institutional Clients Group (ICG) and U.S. Personal Banking in Personal Banking and Wealth Management (PBWM), as well as growth in Banking in ICG. The increase was partially offset by a revenue reduction from the exited markets and continued wind-downs in Legacy Franchises.
Citigroup’s end-of-period loans were $666 billion, up 3% versus the prior-year period, largely driven by growth in U.S. Personal Banking.
Citigroup’s end-of-period deposits were approximately $1.3 trillion, down 3% versus the prior-year period. The decline in deposits was largely due to a reduction in Services, reflecting monetary tightening, a shift of deposits to higher-yielding investments in Global Wealth Management (Global Wealth) and a reduction of institutional certificates of deposit in Corporate/Other. For additional information about Citi’s deposits by business, including drivers and deposit trends, see each respective business’s results of operations and “Liquidity Risk—Deposits” below.
Expenses
Citigroup’s operating expenses of $13.5 billion increased 6% from the prior-year period, both on a reported basis and excluding divestiture-related impacts. The higher expenses largely reflected continued investments in risk and controls, the impact of inflation and severance, partially offset by productivity savings and expense reductions from the exited markets and wind-downs in Legacy Franchises. Expenses also continued to be impacted by investments in Citi’s transformation and business- and enterprise-led investments.
Citi expects to continue to incur higher expenses in the fourth quarter of 2023, including additional severance costs related to its organizational and management simplification initiatives.
Cost of Credit
Citi’s total provisions for credit losses and for benefits and claims was a cost of $1.8 billion, compared to $1.4 billion in the prior-year period. This increase was driven by higher net credit losses (see below), partially offset by a lower net build in the ACL for loans and unfunded commitments and other provisions.
The net build of $203 million in the ACL for loans and unfunded lending commitments and other provisions in the current quarter was primarily driven by growth in Branded cards and Retail services card balances in PBWM. This compared to a net build of $478 million in the ACL for loans and unfunded lending commitments and other provisions in the prior-year period. For additional information on Citi’s ACL, see “Significant Accounting Policies and Significant Estimates—Citi’s Allowance for Credit Losses (ACL)” below.
Net credit losses of $1.6 billion increased 85% from the prior-year period. Consumer net credit losses of $1.6 billion increased 79%, reflecting ongoing normalization, particularly in Branded cards and Retail services. Corporate net credit losses increased to $58 million from $6 million in the prior-year period.
Citi expects to incur higher year-over-year net credit losses for the fourth quarter of 2023, primarily driven by ongoing normalization, particularly in the cards businesses in PBWM. Net credit losses in the cards businesses are expected to reach pre-pandemic levels by the end of 2023.
For additional information on Citi’s consumer and corporate credit costs, see each respective business’s results of operations and “Credit Risk” below.
Capital
Citigroup’s CET1 Capital ratio was 13.6% as of September 30, 2023, compared to 12.3% as of September 30, 2022, based on the Basel III Standardized Approach for determining risk-weighted assets (RWA). The increase was primarily driven by net income and impacts from the sales of certain Asia Consumer Banking (Asia Consumer) businesses, as well as business actions, including a reduction in RWA, partially offset by the payment of common dividends and share repurchases.
During the third quarter of 2023, Citi repurchased $0.5 billion of common shares and paid $1.0 billion of common dividends (see “Unregistered Sales of Equity Securities, Repurchases of Equity Securities and Dividends” below). Citi will continue to assess common share repurchases on a quarter-by-quarter basis given uncertainty regarding regulatory capital requirements. For additional information, see “Capital Resources—Regulatory Capital Standards and Developments” below.
Citigroup’s Supplementary Leverage ratio as of September 30, 2023 was 6.0%, compared to 5.7% as of September 30, 2022, and 5.8% as of December 31, 2022. The increase was driven by higher Tier 1 Capital from net income, partially offset by an increase in Total Leverage Exposure. For additional information on Citi’s capital ratios and related components, see “Capital Resources” below.
Institutional Clients Group
ICG net income of $2.4 billion increased 12%, primarily driven by higher revenues, partially offset by higher expenses and higher cost of credit. ICG operating expenses of $7.2 billion increased 10%, primarily driven by continued investments in risks and controls and volume-related expenses, partially offset by productivity savings.
ICG revenues of $10.6 billion increased 12% (including gain (loss) on loan hedges), driven by growth across Services, Markets and Banking, partially offset by an approximate $180 million net impact from a currency devaluation in Argentina on Citi’s net investment in the country. Revenues also included a loss on loan hedges of $47 million in the third quarter of 2023, compared with a loss on loan hedges of $56 million in the prior-year period.
Services revenues of $4.7 billion increased 13%. TTS revenues of $3.6 billion increased 12%, driven by 17% growth in net interest income and 1% growth in non-interest revenue. The increase in TTS net interest income was primarily driven by higher interest rates and deposit volume growth. The increase in non-interest revenue was driven by continued growth in underlying drivers, primarily a 16% increase in cross-border transaction value, a 6% increase in U.S. dollar clearing volume and an 8% increase in commercial card spend volume. The increase in non-interest revenue was largely offset by the impact from the currency devaluation in Argentina on Citi’s net investment in the country. Securities services revenues of $1.1 billion increased 16%, largely driven by higher net interest income across currencies.
Markets revenues of $4.5 billion increased 10%, driven by an increase of 14% in Fixed income markets, largely reflecting strength in rates and currencies. The increase was partially offset by a decrease of 3% in Equity markets, driven by a decline in equity derivatives, partially offset by growth in equity cash and prime services.
Banking revenues of $1.4 billion increased 18%, including the gain (loss) on loan hedges in the current quarter and the prior-year period. Excluding the gain (loss) on loan hedges, Banking revenues of $1.5 billion increased 17%, driven by higher revenues in Investment banking. Investment banking revenues of $844 million increased 34%, reflecting increased client activity in debt underwriting and an absence of certain realized and unrealized gains (losses) in the prior-year period. Corporate lending revenues increased 2%, including the impact of the gain (loss) on loan hedges. Excluding the impact of the gain (loss) on loan hedges, Corporate lending revenues increased 1% versus the prior-year period. (As used throughout this Form 10-Q, Citi’s results of operations and financial condition excluding the impact of the gain (loss) on loan hedges are non-GAAP financial measures.)
For additional information on the results of operations of ICG for the third quarter of 2023, see “Institutional Clients Group” below.
Personal Banking and Wealth Management
PBWM net income of $803 million increased 1%, as higher revenues were largely offset by higher cost of credit and higher expenses. PBWM operating expenses of $4.3 billion increased 5%, largely driven by investments in risks and controls and severance, partially offset by productivity savings.
PBWM revenues of $6.8 billion increased 10%, driven by growth in net interest income, reflecting strong loan growth in U.S. Personal Banking, as well as higher non-interest revenue, primarily due to lower partner payments in Retail services and higher investment product revenues in Global Wealth.
U.S. Personal Banking revenues of $4.9 billion increased 13%, primarily driven by higher revenues in cards, partially offset by lower Retail banking revenues. Branded cards revenues of $2.5 billion increased 12%, primarily driven by the higher net interest income, as average loans increased 12%. Retail services revenues of $1.7 billion increased 21%, primarily driven by the higher net interest income from loan growth, as well as the lower partner payments. Retail banking revenues of $624 million decreased 3%, largely driven by the transfer of certain relationships and the associated deposits to Global Wealth, partially offset by higher deposit spreads.
Global Wealth revenues of $1.9 billion increased 2%, primarily driven by higher investment product revenues across all regions, the benefit of the transfer of certain relationships and the associated deposits from Retail banking, and higher lending revenue.
For additional information on the results of operations of PBWM for the third quarter of 2023, see “Personal Banking and Wealth Management” below.
Legacy Franchises
Legacy Franchises net income was $125 million, compared to $316 million in the prior-year period, primarily driven by lower revenues and higher cost of credit, partially offset by lower expenses. Legacy Franchises operating expenses of $1.8 billion decreased 3%, primarily driven by the impact of exited markets and continued wind-downs, partially offset by separation costs and the impact of FX translation in Mexico
Consumer, Small Business and Middle-Market Banking (Mexico Consumer/SBMM).
Legacy Franchises revenues of $2.2 billion decreased 13%, largely driven by the lower gain on sale impacts in Asia Consumer and reductions from exited markets and continued wind-downs. The decrease was partially offset by higher revenues in Mexico Consumer/SBMM, largely reflecting the impact of FX translation, higher interest rates and volume growth.
For additional information on the results of operations of Legacy Franchises for the third quarter of 2023, see “Legacy Franchises” below.
Corporate/Other
Corporate/Other net income was $189 million, compared to $209 million in the prior-year period, largely driven by lower income tax benefits, partially offset by higher revenues and lower operating expenses. Corporate/Other operating expenses of $237 million decreased from $286 million in the prior-year period, primarily driven by lower consulting expenses.
Corporate/Other revenues of $500 million increased from $299 million in the prior-year period, largely driven by the absence of prior-year mark-to-market losses, primarily related to retained interchange litigation risk associated with shares of Visa B common stock that Citi previously sold.
For additional information on the results of operations of Corporate/Other for the third quarter of 2023, see “Corporate/Other” below.
Macroeconomic and Other Risks and Uncertainties
Various geopolitical, macroeconomic and regulatory challenges and uncertainties continue to adversely impact economic conditions in the U.S. and globally, including continued elevated interest rates and inflation, economic and geopolitical challenges related to China, the Russia–Ukraine war and escalating tensions and conflicts in the Middle East, and a potential U.S. government shutdown. These and other factors have adversely affected financial markets, negatively impacted global economic growth rates and resulted in a continued risk of recession in the U.S., Europe and other regions and countries. In addition, these and other factors could adversely affect Citi’s customers, clients, businesses, funding costs, cost of credit and overall results of operations and financial condition during the fourth quarter of 2023.
As previously disclosed in May 2023, the Federal Deposit Insurance Corporation (FDIC) issued a proposal that would implement a special assessment to recover its uninsured deposit losses from recent bank failures. The FDIC estimated that the preliminary cost of the failures is approximately $15.8 billion, an estimate that would be periodically adjusted. The FDIC is proposing to collect the special assessment at an annual rate of approximately 12.5 basis points of uninsured U.S. deposits, over eight quarterly assessment periods beginning in 2024. Citi is likely to incur up to a $1.5 billion pretax charge, impacting operating expenses, if the final rule for the FDIC special assessment, which is expected before the end of 2023, is enacted as proposed.
Additionally, in July 2023, the U.S. banking agencies issued a notice of proposed rulemaking, known as the Basel III Endgame, related to regulatory capital requirements that, if finalized as proposed, would have a material impact on Citi’s current capital position. For additional information, see “Capital Resources—Regulatory Capital Standards and Developments—Basel III Revisions” below.
For a further discussion of trends, uncertainties and risks that will or could impact Citi’s businesses, results of operations, capital and other financial condition during the remainder of 2023, see “Third Quarter of 2023 Results Summary” above and each respective business’s results of operations, “Managing Global Risk,” including “Managing Global Risk—Other Risks—Country Risk—Russia” and “—Argentina,” and “Forward-Looking Statements” below and “Risk Factors” in Citi’s 2022 Form 10-K.
RESULTS OF OPERATIONS
SUMMARY OF SELECTED FINANCIAL DATA
Citigroup Inc. and Consolidated Subsidiaries
| Third Quarter | Nine Months | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| In millions of dollars, except per share amounts | 2023 | 2022 | % Change | 2023 | 2022 | % Change | ||||||
| Net interest income | $ | 13,828 | $ | 12,563 | 10 | % | $ | 41,076 | $ | 35,398 | 16 | % |
| Non-interest revenue | 6,311 | 5,945 | 6 | 19,946 | 21,934 | (9) | ||||||
| Revenues, net of interest expense | $ | 20,139 | $ | 18,508 | 9 | % | $ | 61,022 | $ | 57,332 | 6 | % |
| Operating expenses | 13,511 | 12,749 | 6 | 40,370 | 38,307 | 5 | ||||||
| Provisions for credit losses and for benefits and claims | 1,840 | 1,365 | 35 | 5,639 | 3,394 | 66 | ||||||
| Income from continuing operations before income taxes | $ | 4,788 | $ | 4,394 | 9 | % | $ | 15,013 | $ | 15,631 | (4) | % |
| Income taxes | 1,203 | 879 | 37 | 3,824 | 3,002 | 27 | ||||||
| Income from continuing operations | $ | 3,585 | $ | 3,515 | 2 | % | $ | 11,189 | $ | 12,629 | (11) | % |
| Income (loss) from discontinued operations, net of taxes | 2 | (6) | NM | — | (229) | 100 | ||||||
| Net income before attribution of noncontrolling interests | $ | 3,587 | $ | 3,509 | 2 | % | $ | 11,189 | $ | 12,400 | (10) | % |
| Net income attributable to noncontrolling interests | 41 | 30 | 37 | 122 | 68 | 79 | ||||||
| Citigroup’s net income | $ | 3,546 | $ | 3,479 | 2 | % | $ | 11,067 | $ | 12,332 | (10) | % |
| Earnings per share | ||||||||||||
| Basic | ||||||||||||
| Income from continuing operations | $ | 1.64 | $ | 1.64 | — | % | $ | 5.19 | $ | 5.99 | (13) | % |
| Net income | 1.64 | 1.64 | — | 5.19 | 5.87 | (12) | ||||||
| Diluted | ||||||||||||
| Income from continuing operations | $ | 1.63 | $ | 1.63 | — | % | $ | 5.14 | $ | 5.95 | (14) | % |
| Net income | 1.63 | 1.63 | — | 5.14 | 5.84 | (12) | ||||||
| Dividends declared per common share | 0.53 | 0.51 | 4 | 1.55 | 1.53 | 1 | ||||||
| Common dividends | $ | 1,038 | $ | 1,001 | 4 | % | $ | 3,042 | $ | 3,025 | 1 | % |
| Preferred dividends(1) | 333 | 277 | 20 | 898 | 794 | 13 | ||||||
| Common share repurchases | 500 | — | NM | 1,500 | 3,250 | (54) |
Table continues on the next page, including footnotes.
SUMMARY OF SELECTED FINANCIAL DATA
(Continued)
Citigroup Inc. and Consolidated Subsidiaries
| In millions of dollars, except per share amounts, <br>ratios and direct staff | Third Quarter | Nine Months | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2023 | 2022 | % Change | 2023 | 2022 | % Change | |||||||||||||
| At September 30: | ||||||||||||||||||
| Total assets | $ | 2,368,477 | $ | 2,381,064 | (1) | % | ||||||||||||
| Total deposits | 1,273,506 | 1,306,486 | (3) | |||||||||||||||
| Long-term debt | 275,760 | 253,068 | 9 | |||||||||||||||
| Citigroup common stockholders’ equity | 190,008 | 179,565 | 6 | |||||||||||||||
| Total Citigroup stockholders’ equity | 209,503 | 198,560 | 6 | |||||||||||||||
| Average assets | 2,413,779 | 2,399,446 | 1 | $ | 2,447,212 | $ | 2,384,513 | 3 | % | |||||||||
| Direct staff (in thousands) | 240 | 238 | 1 | % | ||||||||||||||
| Performance metrics | ||||||||||||||||||
| Return on average assets | 0.58 | % | 0.58 | % | 0.60 | % | 0.69 | % | ||||||||||
| Return on average common stockholders’ equity(2) | 6.7 | 7.1 | 7.3 | 8.6 | ||||||||||||||
| Return on average total stockholders’ equity(2) | 6.7 | 6.9 | 7.1 | 8.3 | ||||||||||||||
| Return on tangible common equity (RoTCE)(3) | 7.7 | 8.2 | 8.3 | 9.9 | ||||||||||||||
| Efficiency ratio (total operating expenses/total revenues, net) | 67.1 | 68.9 | 66.2 | 66.8 | ||||||||||||||
| Basel III ratios | ||||||||||||||||||
| CET1 Capital(4)(5) | 13.59 | % | 12.26 | % | ||||||||||||||
| Tier 1 Capital(4)(5) | 15.40 | 13.97 | ||||||||||||||||
| Total Capital(4)(5) | 15.78 | 14.99 | ||||||||||||||||
| Supplementary Leverage ratio | 6.04 | 5.71 | ||||||||||||||||
| Citigroup common stockholders’ equity to assets | 8.02 | % | 7.54 | % | ||||||||||||||
| Total Citigroup stockholders’ equity to assets | 8.85 | 8.34 | ||||||||||||||||
| Dividend payout ratio(6) | 33 | 31 | 30 | % | 26 | % | ||||||||||||
| Total payout ratio(7) | 48 | 31 | 45 | 54 | ||||||||||||||
| Book value per common share | $ | 99.28 | $ | 92.71 | 7 | % | ||||||||||||
| Tangible book value per share (TBVPS)(3) | 86.90 | 80.34 | 8 |
(1) Certain series of preferred stock have semiannual payment dates. See Note 19.
(2) 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.
(3) RoTCE and TBVPS are non-GAAP financial measures. For information on RoTCE and TBVPS, see “Capital Resources—Tangible Common Equity, Book Value Per Share, Tangible Book Value Per Share and Return on Equity” below.
(4) Citi’s binding CET1 Capital and Tier 1 Capital ratios were derived under the Basel III Standardized Approach, whereas Citi’s binding Total Capital ratio was derived under the Basel III Advanced Approaches framework for both periods presented.
(5) Certain of the above prior-period amounts have been revised to conform with enhancements made in the current period.
(6) Dividends declared per common share as a percentage of net income per diluted share.
(7) Total common dividends declared plus common share repurchases as a percentage of net income available to common shareholders (Net income less preferred dividends). See “Consolidated Statement of Changes in Stockholders’ Equity,” Note 9 and “Equity Security Repurchases” below for the component details.
NM Not meaningful
SEGMENT REVENUES AND INCOME (LOSS)
REVENUES
| Third Quarter | Nine Months | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| In millions of dollars | 2023 | 2022 | % Change | 2023 | 2022 | % Change | ||||||
| Institutional Clients Group | $ | 10,644 | $ | 9,468 | 12 | % | $ | 32,318 | $ | 32,047 | 1 | % |
| Personal Banking and Wealth Management | 6,778 | 6,187 | 10 | 19,621 | 18,121 | 8 | ||||||
| Legacy Franchises | 2,217 | 2,554 | (13) | 6,992 | 6,420 | 9 | ||||||
| Corporate/Other | 500 | 299 | 67 | 2,091 | 744 | NM | ||||||
| Total Citigroup net revenues | $ | 20,139 | $ | 18,508 | 9 | % | $ | 61,022 | $ | 57,332 | 6 | % |
NM Not meaningful
INCOME
| Third Quarter | Nine Months | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| In millions of dollars | 2023 | 2022 | % Change | 2023 | 2022 | % Change | ||||||
| Income (loss) from continuing operations | ||||||||||||
| Institutional Clients Group | $ | 2,465 | $ | 2,186 | 13 | % | $ | 7,982 | $ | 8,822 | (10) | % |
| Personal Banking and Wealth Management | 803 | 792 | 1 | 1,786 | 3,205 | (44) | ||||||
| Legacy Franchises | 127 | 316 | (60) | 611 | (84) | NM | ||||||
| Corporate/Other | 190 | 221 | (14) | 810 | 686 | 18 | ||||||
| Income from continuing operations | $ | 3,585 | $ | 3,515 | 2 | % | $ | 11,189 | $ | 12,629 | (11) | % |
| Discontinued operations | $ | 2 | $ | (6) | NM | $ | — | $ | (229) | 100 | % | |
| Less: Net income attributable to noncontrolling interests | 41 | 30 | 37 | % | 122 | 68 | 79 | |||||
| Citigroup’s net income | $ | 3,546 | $ | 3,479 | 2 | % | $ | 11,067 | $ | 12,332 | (10) | % |
NM Not meaningful
SEGMENT BALANCE SHEET(1)—SEPTEMBER 30, 2023
| In millions of dollars | Institutional<br>Clients<br>Group | Personal Banking <br>and Wealth Management | Legacy Franchises | Corporate/Other<br><br>and<br><br>consolidating<br><br>eliminations(2) | Citigroup<br><br>parent company-<br><br>issued long-term<br><br>debt and<br><br>stockholders’<br><br>equity(3) | Total<br>Citigroup<br>consolidated | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Assets | ||||||||||||
| Cash and deposits with banks, net of allowance | $ | 100,907 | $ | 6,242 | $ | 2,948 | $ | 143,890 | $ | — | $ | 253,987 |
| Securities borrowed and purchased under agreements to resell, net of allowance | 334,419 | 320 | 320 | — | — | 335,059 | ||||||
| Trading account assets | 395,108 | 1,301 | 433 | 9,526 | — | 406,368 | ||||||
| Investments, net of allowance | 142,851 | 13 | 1,519 | 364,615 | — | 508,998 | ||||||
| Loans, net of unearned income and allowance for credit losses on loans | 277,866 | 335,971 | 34,882 | — | — | 648,719 | ||||||
| Other assets, net of allowance | 127,263 | 25,541 | 17,710 | 44,832 | — | 215,346 | ||||||
| Net intersegment liquid assets(4) | 343,647 | 101,279 | 22,674 | (467,600) | — | — | ||||||
| Total assets | $ | 1,722,061 | $ | 470,667 | $ | 80,486 | $ | 95,263 | $ | — | $ | 2,368,477 |
| Liabilities and equity | ||||||||||||
| Total deposits | $ | 782,346 | $ | 416,257 | $ | 50,845 | $ | 24,058 | $ | — | $ | 1,273,506 |
| Securities loaned and sold under <br>agreements to repurchase | 253,948 | 30 | 2,754 | 38 | — | 256,770 | ||||||
| Trading account liabilities | 163,251 | 529 | 255 | 589 | — | 164,624 | ||||||
| Short-term borrowings | 32,596 | 1 | — | 10,569 | — | 43,166 | ||||||
| Long-term debt(3) | 98,871 | 314 | 76 | 15,928 | 160,571 | 275,760 | ||||||
| Other liabilities | 102,400 | 13,337 | 13,747 | 14,972 | — | 144,456 | ||||||
| Net intersegment funding (lending)(3) | 288,649 | 40,199 | 12,809 | 28,417 | (370,074) | — | ||||||
| Total liabilities | $ | 1,722,061 | $ | 470,667 | $ | 80,486 | $ | 94,571 | $ | (209,503) | $ | 2,158,282 |
| Total equity(5) | — | — | — | 692 | 209,503 | 210,195 | ||||||
| Total liabilities and equity | $ | 1,722,061 | $ | 470,667 | $ | 80,486 | $ | 95,263 | $ | — | $ | 2,368,477 |
(1)The supplemental information presented in the table above reflects Citigroup’s consolidated GAAP balance sheet by reportable segment and component. The respective segment information depicts the assets and liabilities managed by each segment.
(2)Consolidating eliminations for total Citigroup and Citigroup parent company assets and liabilities are recorded within Corporate/Other.
(3)The total equity and the majority of long-term debt of Citigroup are reflected on the Citigroup parent company balance sheet (see Notes 17 and 27). Citigroup allocates stockholders’ equity and long-term debt to its businesses through intersegment allocations as shown above.
(4)Represents the attribution of Citigroup’s liquid assets (primarily consisting of cash, marketable equity securities and AFS debt securities) to the various businesses based on Liquidity Coverage ratio (LCR) assumptions.
(5)Corporate/Other equity represents noncontrolling interests.
INSTITUTIONAL CLIENTS GROUP
Institutional Clients Group (ICG) includes Services, Markets and Banking (for additional information on these businesses, see “Citigroup Operating Segments” above). ICG provides corporate, institutional and public sector clients around the world with a full range of wholesale banking products and services, including fixed income and equity sales and trading, foreign exchange, prime brokerage, derivative services, equity and fixed income research, corporate lending, investment banking and advisory services, cash management, trade finance and securities services. ICG transacts with clients in both cash instruments and derivatives, including fixed income, foreign currency, equity and commodity products. For more information on ICG’s business activities, see “Institutional Clients Group” in Citi’s 2022 Form 10-K.
For information on Citi’s planned revision to its financial reporting structure as of the end of the fourth quarter of 2023, including, among other things, the elimination of the ICG operating segment and the resulting creation of three new reportable operating segments (Services, consisting of Treasury and Trade Solutions and Securities Services; Markets, consisting of Fixed Income and Equity markets; and Banking, consisting of Investment Banking and Corporate Lending), see “Planned Revision to Operating Model and Financial Reporting Structure” above.
ICG’s international presence is supported by trading floors in approximately 80 countries and a proprietary network in 95 countries and jurisdictions. As previously disclosed, as of March 31, 2023, Citi ended nearly all of the institutional banking services it offered in Russia, with the remaining services only those necessary to fulfill its remaining legal and regulatory obligations. For additional information about Citi’s continued efforts to reduce its operations and exposure in Russia, see “Managing Global Risk—Other Risks—Country Risk—Russia” below.
At September 30, 2023, ICG had $1.7 trillion in assets and $782 billion in deposits. Securities services managed $23.0 trillion in assets under custody and administration at September 30, 2023, of which Citi provided both custody and administrative services to certain clients related to $1.8 trillion of such assets. Managed assets under trust were $4.1 trillion at September 30, 2023. For additional information on these operations, see “Administration and Other Fiduciary Fees” in Note 5.
| Third Quarter | Nine Months | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| In millions of dollars, except as otherwise noted | 2023 | 2022 | % Change | 2023 | 2022 | % Change | ||||||||||
| Commissions and fees | $ | 1,138 | $ | 1,082 | 5 | % | $ | 3,414 | $ | 3,337 | 2 | % | ||||
| Administration and other fiduciary fees | 673 | 651 | 3 | 2,036 | 2,055 | (1) | ||||||||||
| Investment banking fees(1) | 805 | 816 | (1) | 2,325 | 2,845 | (18) | ||||||||||
| Principal transactions | 2,899 | 2,776 | 4 | 9,071 | 11,576 | (22) | ||||||||||
| Other | (365) | (427) | 15 | (673) | (640) | (5) | ||||||||||
| Total non-interest revenue | $ | 5,150 | $ | 4,898 | 5 | % | $ | 16,173 | $ | 19,173 | (16) | % | ||||
| Net interest income (including dividends) | 5,494 | 4,570 | 20 | 16,145 | 12,874 | 25 | ||||||||||
| Total revenues, net of interest expense | $ | 10,644 | $ | 9,468 | 12 | % | $ | 32,318 | $ | 32,047 | 1 | % | ||||
| Total operating expenses | $ | 7,179 | $ | 6,541 | 10 | % | $ | 21,438 | $ | 19,698 | 9 | % | ||||
| Net credit losses on loans | $ | 51 | $ | — | — | % | $ | 146 | $ | 48 | NM | |||||
| Credit reserve build (release) for loans | 101 | 75 | 35 | (124) | 595 | NM | ||||||||||
| Provision (release) for credit losses on unfunded lending commitments | (40) | (59) | 32 | (298) | 124 | NM | ||||||||||
| Provisions (releases) for credit losses on HTM debt securities and other assets | 84 | 70 | 20 | 458 | 88 | NM | ||||||||||
| Provisions (releases) for credit losses | $ | 196 | $ | 86 | NM | $ | 182 | $ | 855 | (79) | % | |||||
| Income from continuing operations before taxes | $ | 3,269 | $ | 2,841 | 15 | % | $ | 10,698 | $ | 11,494 | (7) | % | ||||
| Income taxes | 804 | 655 | 23 | 2,716 | 2,672 | 2 | ||||||||||
| Income from continuing operations | $ | 2,465 | $ | 2,186 | 13 | % | $ | 7,982 | $ | 8,822 | (10) | % | ||||
| Noncontrolling interests | 36 | 24 | 50 | 105 | 59 | 78 | ||||||||||
| Net income | $ | 2,429 | $ | 2,162 | 12 | % | $ | 7,877 | $ | 8,763 | (10) | % | ||||
| Balance Sheet data (in billions of dollars) | ||||||||||||||||
| EOP assets | $ | 1,722 | $ | 1,706 | 1 | % | ||||||||||
| Average assets | 1,757 | 1,729 | 2 | $ | 1,775 | $ | 1,704 | 4 | % | |||||||
| Efficiency ratio | 67 | % | 69 | % | 66 | % | 61 | % | ||||||||
| Average loans by reporting unit (in billions of dollars) | ||||||||||||||||
| Services | $ | 83 | $ | 82 | 1 | % | $ | 81 | $ | 82 | (1) | % | ||||
| Banking | 181 | 197 | (8) | 186 | 197 | (6) | ||||||||||
| Markets | 14 | 12 | 17 | 13 | 13 | — | ||||||||||
| Total | $ | 278 | $ | 291 | (4) | % | $ | 280 | $ | 292 | (4) | % | ||||
| Average deposits by reporting unit (in billions of dollars) | ||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||
| TTS | $ | 676 | $ | 664 | 2 | % | $ | 690 | $ | 669 | 3 | % | ||||
| Securities services | 120 | 131 | (8) | 123 | 134 | (8) | ||||||||||
| Services | $ | 796 | $ | 795 | — | % | $ | 813 | $ | 803 | 1 | % | ||||
| Markets and Banking | 25 | 22 | 14 | 24 | 21 | 14 | ||||||||||
| Total | $ | 821 | $ | 817 | — | % | $ | 837 | $ | 824 | 2 | % |
(1) Investment banking fees are substantially composed of underwriting and advisory revenues.
NM Not meaningful
ICG Revenue Details
| Third Quarter | Nine Months | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| In millions of dollars | 2023 | 2022 | % Change | 2023 | 2022 | % Change | ||||||
| Services | ||||||||||||
| Net interest income | $ | 3,133 | $ | 2,619 | 20 | % | $ | 8,886 | $ | 6,897 | 29 | % |
| Non-interest revenue | 1,582 | 1,558 | 2 | 4,951 | 4,795 | 3 | ||||||
| Total Services revenues | $ | 4,715 | $ | 4,177 | 13 | % | $ | 13,837 | $ | 11,692 | 18 | % |
| Net interest income | $ | 2,607 | $ | 2,231 | 17 | % | $ | 7,390 | $ | 5,960 | 24 | % |
| Non-interest revenue | 984 | 977 | 1 | 3,122 | 2,911 | 7 | ||||||
| TTS revenues | $ | 3,591 | $ | 3,208 | 12 | % | $ | 10,512 | $ | 8,871 | 18 | % |
| Net interest income | $ | 526 | $ | 388 | 36 | % | $ | 1,496 | $ | 937 | 60 | % |
| Non-interest revenue | 598 | 581 | 3 | 1,829 | 1,884 | (3) | ||||||
| Securities services revenues | $ | 1,124 | $ | 969 | 16 | % | $ | 3,325 | $ | 2,821 | 18 | % |
| Markets | ||||||||||||
| Net interest income | $ | 1,578 | $ | 1,228 | 29 | % | $ | 5,030 | $ | 3,675 | 37 | % |
| Non-interest revenue | 2,902 | 2,840 | 2 | 9,670 | 11,494 | (16) | ||||||
| Total Markets revenues(1) | $ | 4,480 | $ | 4,068 | 10 | % | $ | 14,700 | $ | 15,169 | (3) | % |
| Fixed income markets | $ | 3,562 | $ | 3,122 | 14 | % | $ | 11,545 | $ | 11,489 | — | % |
| Equity markets | 918 | 946 | (3) | 3,155 | 3,680 | (14) | ||||||
| Total Markets revenues | $ | 4,480 | $ | 4,068 | 10 | % | $ | 14,700 | $ | 15,169 | (3) | % |
| Rates and currencies | $ | 2,801 | $ | 2,492 | 12 | % | $ | 9,285 | $ | 8,955 | 4 | % |
| Spread products / other fixed income | 761 | 630 | 21 | 2,260 | 2,534 | (11) | ||||||
| Total Fixed income markets revenues | $ | 3,562 | $ | 3,122 | 14 | % | $ | 11,545 | $ | 11,489 | — | % |
| Banking | ||||||||||||
| Net interest income | $ | 783 | $ | 723 | 8 | % | $ | 2,229 | $ | 2,302 | (3) | % |
| Non-interest revenue | 666 | 500 | 33 | 1,552 | 2,884 | (46) | ||||||
| Total Banking revenues | $ | 1,449 | $ | 1,223 | 18 | % | $ | 3,781 | $ | 5,186 | (27) | % |
| Investment banking | ||||||||||||
| Advisory | $ | 309 | $ | 392 | (21) | % | $ | 760 | $ | 1,096 | (31) | % |
| Equity underwriting | 132 | 100 | 32 | 403 | 462 | (13) | ||||||
| Debt underwriting | 403 | 139 | NM | 1,067 | 906 | 18 | ||||||
| Total Investment banking revenues | $ | 844 | $ | 631 | 34 | % | $ | 2,230 | $ | 2,464 | (9) | % |
| Corporate lending (excluding gains (losses) on loan hedges)(2) | $ | 652 | $ | 648 | 1 | % | $ | 1,863 | $ | 2,115 | (12) | % |
| Total Banking revenues (excluding gains (losses) on loan hedges)(2) | $ | 1,496 | $ | 1,279 | 17 | % | $ | 4,093 | $ | 4,579 | (11) | % |
| Gain (loss) on loan hedges(2) | (47) | (56) | 16 | (312) | 607 | NM | ||||||
| Total Banking revenues (including gains (losses) on loan hedges)(2) | $ | 1,449 | $ | 1,223 | 18 | % | $ | 3,781 | $ | 5,186 | (27) | % |
| Total ICG revenues, net of interest expense | $ | 10,644 | $ | 9,468 | 12 | % | $ | 32,318 | $ | 32,047 | 1 | % |
(1) Citi assesses its Markets business performance on a total revenue basis, as offsets may occur across revenue line items. For example, securities that generate Net interest income may be risk managed with derivatives that are recorded in Principal transactions revenue within Non-interest revenue. For a description of the composition of these revenue line items, see Notes 4, 5 and 6.
(2) Credit derivatives are used to economically hedge a portion of the corporate loan portfolio that includes both accrual loans and loans at fair value. Gain (loss) on loan hedges includes the mark-to-market on the credit derivatives and the mark-to-market on the loans in the portfolio that are at fair value. The fixed premium costs of these hedges are netted against the corporate lending revenues to reflect the cost of credit protection. Citigroup’s results of operations excluding the impact of gain (loss) on loan hedges are non-GAAP financial measures.
NM Not meaningful
The discussion of the results of operations for ICG below excludes (where noted) the impact of any gain (loss) on hedges of accrual loans, which are non-GAAP financial measures. For a reconciliation of these metrics to the reported results, see the table above.
3Q23 vs. 3Q22
Net income of $2.4 billion increased 12%, primarily driven by higher revenues, partially offset by higher expenses and higher cost of credit.
Revenues increased 12% (including gain (loss) on loan hedges), driven by higher Services, Banking and Markets revenues, partially offset by an approximate $180 million net impact from a currency devaluation in Argentina on Citi’s net investment in the country. Services revenues were up 13%, driven by higher revenues in both TTS and Securities services. Banking revenues were up 18% (including the impact of the gain (loss) on loan hedges), reflecting higher revenues in both Investment banking and Corporate lending. Markets revenues were up 10%, driven by higher revenues in Fixed income markets, partially offset by lower revenues in Equity markets.
Citi expects revenues in its Markets and Investment banking businesses will continue to reflect the overall market environment during the fourth quarter of 2023.
Within Services:
•TTS revenues increased 12%, driven by 17% growth in net interest income and 1% growth in non-interest revenue, reflecting strong growth across all client segments. The increase in net interest income was primarily driven by higher interest rates as well as growth in deposits, partially offset by higher interest rates paid on deposits. Average deposits increased 2%, largely driven by growth in EMEA, Asia and Latin America. On a quarter-over-quarter basis, average deposits were down, mainly in North America, driven by portfolio optimization efforts and monetary tightening. Average loans increased 2%, mainly driven by growth in Latin America and North America. The increase in non-interest revenue was driven by strong fee growth in the cash business, reflecting solid client engagement and continued growth of underlying drivers, including higher cross-border flows (up 16%), U.S. dollar clearing volume (up 6%) and commercial card spend (up 8%). The increase in non-interest revenue was largely offset by the impact from the currency devaluation in Argentina.
•Securities services revenues increased 16%, as net interest income grew 36%, driven by higher interest rates across currencies and cost of funds management, partially offset by the impact of an 8% decline in average deposits. The decline in average deposits reflected the impact of monetary tightening. Non-interest revenues increased 3%, driven by higher fees due to higher assets under custody and administration and continued elevated levels of corporation actions in Issuer services. The increase in
non-interest revenue was partially offset by the impact from the currency devaluation in Argentina.
Within Markets:
•Fixed income markets increased 14%, driven by North America, largely reflecting strength in rates and currencies despite continued lower market volatility.
Rates and currencies increased 12%, driven by a conducive rate environment and associated market-making activity. Spread products and other fixed income revenues increased 21%. This increase was driven by North America, reflecting higher commodities revenue, and growth in the financing and securitization business, including increased client or market activity.
•Equity markets revenues decreased 3%, driven by a decline in equity derivatives, partially offset by growth in equity cash and prime services. The decline in equity derivatives revenues reflected a more challenging macroeconomic environment and lower volatility. The increase in equity cash revenue was driven by increased client activity. Prime services revenues increased modestly and the business continued to grow prime finance balances.
Within Banking:
•Investment banking revenues increased 34%, as strength in equity and debt underwriting was partially offset by a decline in advisory. Advisory revenues decreased 21%, reflecting a decline in EMEA, driven by macroeconomic uncertainties resulting in a lower market wallet, in addition to lower wallet share. Equity underwriting revenues increased 32%, reflecting growth in EMEA and North America, driven by growth in wallet share, partially offset by lower market wallet. Debt underwriting revenues increased 190%, reflecting growth in North America and EMEA, driven by wallet share gains, largely in investment grade, as well as growth in leveraged loans. The increase in debt underwriting revenues also reflected an absence of certain realized and unrealized losses of $110 million in the prior-year period, compared to gains of $16 million in the current-year period.
•Corporate lending revenues increased 2%, including the impact of gains (losses) on loan hedges. Excluding the impact of gains (losses) on loan hedges, revenues increased modestly (up 1%).
Expenses increased 10%, primarily driven by continued investment in risk and controls and volume-related expenses, partially offset by productivity savings.
Provisions reflected a cost of $196 million, compared to $86 million in the prior-year period, largely driven by an ACL build for loans and higher net credit losses. Net credit losses were $51 million, compared to no losses in the prior-year period.
The ACL build was $145 million, compared to $86 million in the prior-year period, largely driven by an ACL build for loans of $101 million, primarily due to specific risks and uncertainties impacting vulnerable industries and regions, partially offset by improved key macroeconomic variable forecasts. For additional information on Citi’s ACL, see “Significant Accounting Policies and Significant Estimates” below.
For additional information on ICG’s corporate credit portfolio, see “Managing Global Risk—Credit Risk—Corporate Credit” below.
For additional information on trends in ICG’s deposits and loans, see “Managing Global Risk—Liquidity Risk—Loans” and “—Deposits” below.
For additional information about trends, uncertainties and risks related to ICG’s future results, see “Executive Summary” above, “Managing Global Risk—Other Risks—Country Risk—Argentina” and “—Russia” and “Forward-Looking Statements” below and “Risk Factors” in Citi’s 2022 Form 10-K.
2023 YTD vs. 2022 YTD
Net income of $7.9 billion decreased 10%, primarily driven by higher expenses and higher cost of credit, partially offset by a modest increase in revenues.
Revenues increased 1% (including gain (loss) on loan hedges), driven by higher Services revenues, partially offset by lower Banking and Markets revenues as well as the approximate $180 million net impact from the currency devaluation in Argentina. Services revenues increased 18%, driven by higher revenues in both TTS and Securities services. Banking revenues declined 27% (including the impact of the gain (loss) on loan hedges), reflecting lower revenues in both Investment banking and Corporate lending. Markets revenues declined 3%, driven by lower revenues in Equity markets, reflecting lower client activity, driven by decreased volatility and a strong prior-year comparison.
Within Services:
•TTS revenues increased 18%, with growth in net interest income of 24% and non-interest revenue of 7%, largely driven by the same factors described above.
•Securities services revenues increased 18%, reflecting higher net interest income, largely driven by the same factors described above. Non-interest revenue declined 3%, as a decrease in revenues in the custody business and the impact from the currency devaluation in Argentina were partially offset by an increase in Issuer services.
Within Markets:
•Fixed income markets revenues were largely unchanged. Rates and currencies revenues increased 4%, driven by strength in rates, partially offset by a decline in the currencies business, primarily reflecting lower volatility and a strong prior-year comparison. Spread products and other fixed income revenues decreased 11%, driven by lower client activity.
•Equity markets revenues decreased 14%, primarily due to a decline in equity derivatives, largely driven by the same factors described above, as well as a modest decline in equity cash.
Within Banking:
•Investment banking revenues decreased 9%. Advisory revenues decreased 31%, primarily driven by lower market wallet. Equity underwriting revenues decreased 13%, driven by lower wallet share. Debt underwriting revenues increased 18%, driven by growth in wallet share, partially offset by a decline in market wallet.
•Corporate lending revenues decreased 43%, including the impact of gains (losses) on loan hedges. Excluding the impact of gains (losses) on loan hedges, revenues decreased 12%, primarily driven by the impact of foreign currency translation, as well as lower volumes.
Expenses increased 9%, primarily driven by continued investment in Citi’s transformation, investments in TTS, other risk and controls investments, volume-related expenses and other structural expenses, including severance costs, partially offset by productivity savings and FX translation.
Provisions reflected a cost of $182 million, compared to $855 million in the prior-year period. Net credit losses were $146 million, compared to $48 million in the prior-year period.
The ACL build was $36 million, compared to $807 million in the prior-year period. The lower build was driven by the absence of Russia-related ACL builds in the prior-year period. The lower build was partially offset by a $458 million build for other assets, primarily related to an increase in transfer risk associated with exposures outside the U.S. driven by safety and soundness considerations under U.S. banking law.
PERSONAL BANKING AND WEALTH MANAGEMENT
Personal Banking and Wealth Management (PBWM) consists of U.S. Personal Banking and Global Wealth Management (Global Wealth). U.S. Personal Banking includes Branded cards and Retail services, which have proprietary card portfolios (Cash, Rewards and Value) and co-branded cards (including Costco and American Airlines) within Branded cards, and co-brand and private label relationships within Retail services (including, among others, The Home Depot, Best Buy, Sears and Macy’s). U.S. Personal Banking also includes Retail banking, which provides traditional banking services to retail and small business customers. Global Wealth includes Private bank, Wealth at Work and Citigold and provides financial services to clients from affluent to ultra-high-net-worth through banking, lending, mortgages, investment, custody and trust product offerings in 20 countries, including the U.S., Mexico and four wealth management centers: Singapore, Hong Kong, the UAE and London.
For information on Citi’s planned revision to its financial reporting structure as of the end of the fourth quarter of 2023, including, among other things, the elimination of the PBWM operating segment and the resulting creation of two new reportable operating segments (Wealth, consisting of Private Bank, Wealth at Work and Citigold; and U.S. Personal Banking, consisting of Cards (Branded Cards and Retail Services) and Retail Banking), see “Planned Revision to Operating Model and Financial Reporting Structure” above.
At September 30, 2023, U.S. Personal Banking had 652 retail bank branches concentrated in the six key metropolitan areas of New York, Chicago, Los Angeles, San Francisco, Miami and Washington, D.C. U.S. Personal Banking had $156 billion in outstanding credit card balances, $109 billion in deposits, $39 billion in mortgages and $4 billion in personal and small business loans. Global Wealth had $307 billion in deposits, $89 billion in mortgage loans, $57 billion in personal and small business loans and $5 billion in outstanding credit card balances.
| Third Quarter | Nine Months | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| In millions of dollars, except as otherwise noted | 2023 | 2022 | % Change | 2023 | 2022 | % Change | ||||||||||
| Net interest income | $ | 6,356 | $ | 5,836 | 9 | % | $ | 18,253 | $ | 16,790 | 9 | % | ||||
| Non-interest revenue | 422 | 351 | 20 | 1,368 | 1,331 | 3 | ||||||||||
| Total revenues, net of interest expense | $ | 6,778 | $ | 6,187 | 10 | % | $ | 19,621 | $ | 18,121 | 8 | % | ||||
| Total operating expenses | $ | 4,301 | $ | 4,077 | 5 | % | $ | 12,759 | $ | 11,951 | 7 | % | ||||
| Net credit losses on loans | $ | 1,367 | $ | 723 | 89 | % | $ | 3,702 | $ | 2,113 | 75 | % | ||||
| Credit reserve build (release) for loans | 95 | 360 | (74) | 935 | (64) | NM | ||||||||||
| Provision (release) for credit losses on unfunded lending commitments | (9) | 19 | NM | (13) | 30 | NM | ||||||||||
| Provisions for benefits and claims (PBC), and other assets | 4 | 7 | (43) | 3 | 9 | (67) | ||||||||||
| Provisions (releases) for credit losses and PBC | $ | 1,457 | $ | 1,109 | 31 | % | $ | 4,627 | $ | 2,088 | NM | |||||
| Income from continuing operations before taxes | $ | 1,020 | $ | 1,001 | 2 | % | $ | 2,235 | $ | 4,082 | (45) | % | ||||
| Income taxes | 217 | 209 | 4 | 449 | 877 | (49) | ||||||||||
| Income from continuing operations | $ | 803 | $ | 792 | 1 | % | $ | 1,786 | $ | 3,205 | (44) | % | ||||
| Noncontrolling interests | — | — | — | — | — | — | ||||||||||
| Net income | $ | 803 | $ | 792 | 1 | % | $ | 1,786 | $ | 3,205 | (44) | % | ||||
| Balance Sheet data (in billions of dollars) | ||||||||||||||||
| EOP assets | $ | 471 | $ | 479 | (2) | % | ||||||||||
| Average assets | 474 | 473 | — | $ | 484 | $ | 474 | 2 | % | |||||||
| Average loans | 347 | 325 | 7 | 340 | 318 | 7 | ||||||||||
| Average deposits | 421 | 428 | (2) | 429 | 437 | (2) | ||||||||||
| Efficiency ratio | 63 | % | 66 | % | 65 | % | 66 | % | ||||||||
| Net credit losses as a percentage of average loans | 1.57 | 0.88 | 1.46 | 0.89 | ||||||||||||
| Revenue by reporting unit and component | ||||||||||||||||
| Branded cards | $ | 2,538 | $ | 2,258 | 12 | % | $ | 7,356 | $ | 6,516 | 13 | % | ||||
| Retail services | 1,731 | 1,431 | 21 | 4,990 | 4,030 | 24 | ||||||||||
| Retail banking | 624 | 642 | (3) | 1,831 | 1,893 | (3) | ||||||||||
| U.S. Personal Banking | $ | 4,893 | $ | 4,331 | 13 | % | $ | 14,177 | $ | 12,439 | 14 | % | ||||
| Private bank | $ | 640 | $ | 649 | (1) | % | $ | 1,812 | $ | 2,173 | (17) | % | ||||
| Wealth at Work | 234 | 182 | 29 | 651 | 535 | 22 | ||||||||||
| Citigold | 1,011 | 1,025 | (1) | 2,981 | 2,974 | — | ||||||||||
| Global Wealth | $ | 1,885 | $ | 1,856 | 2 | % | $ | 5,444 | $ | 5,682 | (4) | % | ||||
| Total | $ | 6,778 | $ | 6,187 | 10 | % | $ | 19,621 | $ | 18,121 | 8 | % |
NM Not meaningful
3Q23 vs. 3Q22
Net income was $803 million, compared to $792 million in the prior-year period, driven by higher revenues, partially offset by higher cost of credit and higher expenses.
Revenues increased 10%, primarily driven by higher net interest income, reflecting strong loan growth in U.S. Personal Banking, as well as higher non-interest revenue, primarily due to lower partner payments in Retail services and higher investment product revenues in Global Wealth.
U.S. Personal Banking revenues increased 13%, reflecting higher revenues in cards, partially offset by lower revenues in Retail banking.
Cards revenues increased 16%. Branded cards revenues increased 12%, primarily driven by the higher net interest income, reflecting the strong loan growth. Branded cards new account acquisitions increased 5% and card spend volumes increased 4%. Average loans increased 12%, reflecting lower payment rates and the higher card spend volumes.
Retail services revenues increased 21%, primarily driven by the higher net interest income on higher loan balances, as well as higher non-interest revenue due to the lower partner payments on higher net credit losses. Retail services card spend volumes decreased 5%, primarily driven by lower discretionary retail spend. Average loans increased 9%, reflecting lower payment rates, partially offset by the lower card spend volumes.
Retail banking revenues decreased 3%, primarily driven by the impact of the transfer of certain relationships and the associated deposit balances to Global Wealth, partially offset by strength in deposit spreads. Average loans increased 17%, primarily driven by mortgage originations and lower refinancings due to higher interest rates. Average deposits decreased 4%, largely reflecting the transfer of certain relationships and the associated deposit balances to Global Wealth.
Global Wealth revenues increased 2%, primarily driven by higher investment product revenue across all regions, the benefits of the transfer of certain relationships and the associated deposit balances from Retail banking, and higher lending revenue. Average loans were largely unchanged. Average deposits decreased 1%, reflecting transfers to higher-yielding investments on Citi’s platform. Client assets increased 7%, primarily driven by increases in market valuations and net new inflows. Client advisors were largely unchanged. Private bank revenues decreased 1%, driven by higher interest rates paid on deposits, partially offset by the higher investment product revenue. Wealth at Work revenues increased 29%, driven by higher lending spreads and loan growth, primarily in mortgages, and Citigold revenues decreased 1%.
Expenses increased 5%, largely driven by risk and controls investments and severance costs, partially offset by productivity savings.
Provisions were $1.5 billion, compared to $1.1 billion in the prior-year period, largely driven by higher net credit losses, partially offset by a lower net ACL build for loans. Net credit losses increased 89%, reflecting ongoing normalization in cards, with Branded cards net credit losses up 103% to $707 million and Retail services net credit losses up 82% to $573 million. Both Branded cards and Retail services net credit losses are expected to reach pre-pandemic levels by the end of 2023.
The net ACL build was $90 million, compared to $386 million in the prior-year period, primarily reflecting growth in loan balances in Branded cards and Retail services. For additional information on Citi’s ACL, see “Significant Accounting Policies and Significant Estimates” below.
For additional information on U.S. Personal Banking’s Branded cards, Retail services and Retail banking portfolios, see “Credit Risk—Consumer Credit” below.
For additional information about trends, uncertainties and risks related to PBWM’s future results, see “Executive Summary” above and “Forward-Looking Statements” below, and “Risk Factors—Strategic Risks” in Citi’s 2022 Form 10-K.
2023 YTD vs. 2022 YTD
Net income was $1.8 billion, compared to $3.2 billion in the prior-year period, driven by higher cost of credit and higher expenses, partially offset by higher revenues.
Revenues increased 8%, largely due to higher revenues in U.S. Personal Banking. U.S. Personal Banking revenues increased 14%, reflecting higher revenues in cards, largely driven by the same factors described above. Retail banking revenues decreased 3%, largely driven by the impact of the transfer of certain relationships and the associated deposit balances to Global Wealth. Global Wealth revenues decreased 4%, largely driven by investment product revenue headwinds and lower net interest income, partially offset by the benefits of the transfer of certain relationships and the associated deposit balances from Retail banking.
Expenses increased 7%, primarily driven by continued investments in Citi’s transformation, other risk and controls investments and severance costs, partially offset by productivity savings.
Provisions were $4.6 billion, compared to $2.1 billion in the prior-year period, reflecting higher net credit losses, primarily driven by ongoing normalization in Branded cards and Retail services, as well as a net ACL build for loans.
The net ACL build was $925 million, primarily driven by growth in loan balances in Branded cards and Retail services, compared to a release of $25 million in the prior-year period.
LEGACY FRANCHISES
As of September 30, 2023, Legacy Franchises included (i) Asia Consumer Banking (Asia Consumer), representing the consumer banking operations of the remaining five exit countries (China, Indonesia, Korea, Poland and Russia), (ii) Mexico Consumer Banking (Mexico Consumer) and Mexico Small Business and Middle-Market Banking (Mexico SBMM), collectively Mexico Consumer/SBMM, and (iii) Legacy Holdings Assets (certain North America consumer mortgage loans and other legacy assets). Asia Consumer provides traditional retail banking and branded card products to retail and small business customers. Mexico Consumer/SBMM provides traditional retail banking and branded card products to consumers and small business customers and traditional middle-market banking products and services to commercial customers through Citibanamex.
For information on Citi’s planned revision to its financial reporting structure as of the end of the fourth quarter of 2023, including, among other things, the creation of a new All Other category, which will include Legacy Franchises (Asia Consumer, Mexico Consumer/SBMM and Legacy Holdings Assets), see “Planned Revision to Operating Model and Financial Reporting Structure” above.
Legacy Franchises also included the following eight Asia Consumer businesses prior to their sales: Australia, until its closing in June 2022; the Philippines, until its closing in August 2022; Thailand and Malaysia, until their closings in November 2022; Bahrain, until its closing in December 2022; India and Vietnam, until their closings in March 2023; and Taiwan, until its closing in August 2023.
Additionally, Citi has entered into an agreement to sell its consumer banking business in Indonesia and has continued to make progress on its wind-downs in China, Korea and Russia. In October 2023, Citi also announced the signing of an agreement to sell its onshore consumer wealth business in China. See Note 2 for additional information on Legacy Franchises’ consumer banking business sales and wind-downs. For additional information about Citi’s continued efforts to reduce its operations and exposures in Russia, see “Institutional Clients Group” above and “Managing Global Risk—Other Risks—Country Risk—Russia” below, as well as “Risk Factors” in Citi’s 2022 Form 10-K.
As previously disclosed, Citi intends to pursue an IPO of its consumer, small business and middle-market banking operations in Mexico. Citi will retain its ICG and Private bank businesses in Mexico. Citi currently expects that the separation of the businesses will be completed in the second half of 2024 and that the IPO will take place in 2025.
At September 30, 2023, on a combined basis, Legacy Franchises had 1,355 retail branches, $20 billion in retail banking loans and $51 billion in deposits. In addition, the businesses had $9 billion in outstanding card loan balances, and Mexico SBMM had $8 billion in outstanding corporate loan balances.
| Third Quarter | Nine Months | % Change | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| In millions of dollars, except as otherwise noted | 2023 | 2022 | % Change | 2023 | 2022 | |||||||||||
| Net interest income | $ | 1,279 | $ | 1,385 | (8) | % | $ | 3,914 | $ | 4,367 | (10) | % | ||||
| Non-interest revenue | 938 | 1,169 | (20) | 3,078 | 2,053 | 50 | ||||||||||
| Total revenues, net of interest expense | $ | 2,217 | $ | 2,554 | (13) | % | $ | 6,992 | $ | 6,420 | 9 | % | ||||
| Total operating expenses | $ | 1,794 | $ | 1,845 | (3) | % | $ | 5,324 | $ | 5,952 | (11) | % | ||||
| Net credit losses on loans | $ | 219 | $ | 164 | 34 | % | $ | 595 | $ | 448 | 33 | % | ||||
| Credit reserve build (release) for loans | (17) | 6 | NM | 60 | (168) | NM | ||||||||||
| Provision (release) for credit losses on unfunded lending commitments | (5) | (31) | 84 | (33) | 90 | NM | ||||||||||
| Provisions for benefits and claims (PBC), HTM debt securities and other assets | (9) | 28 | NM | 211 | 78 | NM | ||||||||||
| Provisions (releases) for credit losses and PBC | $ | 188 | $ | 167 | 13 | % | $ | 833 | $ | 448 | 86 | % | ||||
| Income (loss) from continuing operations before taxes | $ | 235 | $ | 542 | (57) | % | $ | 835 | $ | 20 | NM | |||||
| Income taxes | 108 | 226 | (52) | 224 | 104 | NM | ||||||||||
| Income (loss) from continuing operations | $ | 127 | $ | 316 | (60) | % | $ | 611 | $ | (84) | NM | |||||
| Noncontrolling interests | 2 | — | — | 7 | — | — | % | |||||||||
| Net income (loss) | $ | 125 | $ | 316 | (60) | % | $ | 604 | $ | (84) | NM | |||||
| Balance Sheet data (in billions of dollars) | ||||||||||||||||
| EOP assets | $ | 80 | $ | 100 | (20) | % | ||||||||||
| Average assets | 87 | 103 | (16) | $ | 92 | $ | 114 | (19) | % | |||||||
| EOP loans | 37 | 37 | — | |||||||||||||
| EOP deposits | 51 | 50 | 1 | |||||||||||||
| Efficiency ratio | 81 | % | 72 | % | 76 | % | 93 | % | ||||||||
| Revenue by reporting unit and component | ||||||||||||||||
| Asia Consumer | $ | 672 | $ | 1,372 | (51) | % | $ | 2,635 | $ | 3,039 | (13) | % | ||||
| Mexico Consumer/SBMM | 1,552 | 1,173 | 32 | 4,323 | 3,496 | 24 | ||||||||||
| Legacy Holdings Assets | (7) | 9 | NM | 34 | (115) | NM | ||||||||||
| Total | $ | 2,217 | $ | 2,554 | (13) | % | $ | 6,992 | $ | 6,420 | 9 | % |
NM Not meaningful
3Q23 vs. 3Q22
Net income was $125 million, compared to $316 million in the prior-year period, driven by lower revenues and higher cost of credit, partially offset by lower expenses.
Results for the third quarter of 2023 included divestiture-related impacts of approximately $299 million in earnings before taxes (approximately $214 million after-tax), reflecting the following:
•$396 million of aggregate divestiture-related revenues, primarily related to a gain on sale of the Taiwan consumer business, recorded in Other revenue
•$114 million of aggregate divestiture-related expenses, largely relating to separation costs in Mexico Consumer/SBMM and severance costs in Asia Consumer
•$(17) million benefit of divestiture-related credit costs
•$85 million of related taxes
Results for the third quarter of 2022 included divestiture-related impacts of approximately $519 million (approximately $256 million after-tax), reflecting the following:
•$614 million of aggregate divestiture-related revenues, primarily related to a gain on sale of the Philippines consumer business, recorded in Other revenue
•$107 million of aggregate divestiture-related expenses, primarily composed of transaction costs (recognized as an operating expense) associated with the Philippines gain on sale, as well as severance and related costs associated with Asia Consumer
•$(12) million benefit of divestiture-related credit costs
•$263 million of related taxes
Revenues decreased 13%, primarily driven by lower revenues in Asia Consumer, partially offset by higher revenues in Mexico Consumer/SBMM.
Asia Consumer revenues of $672 million decreased from $1.4 billion in the prior-year period, mainly driven by the lower gain on sale impacts in Asia Consumer and the reduction from exited markets and continued wind-downs.
Mexico Consumer/SBMM revenues increased 32%, as cards revenues increased 46%, SBMM revenues increased 27% and retail banking revenues increased 28%, primarily due to the benefit of FX translation as well as higher interest rates and higher lending volumes.
Legacy Holdings Assets revenues of $(7) million decreased from $9 million in the prior-year period, largely driven by the continued wind-down of legacy assets.
Expenses decreased 3%, mainly driven by the impact of the exited markets and continued wind-downs, partially offset by separation costs and the impact of FX translation in Mexico Consumer/SBMM.
Provisions were $188 million, compared to $167 million in the prior-year period, primarily driven by higher net credit losses, partially offset by a net ACL release in the current quarter. Net credit losses increased 34%, largely driven by the ongoing normalization in the Mexico Consumer portfolios.
For additional information about trends, uncertainties and risks related to Legacy Franchises’ future results, see “Executive Summary” above, “Managing Global Risk—Other Risks—Country Risk—Russia” and “Forward-Looking Statements” below and “Risk Factors—Strategic Risks” in Citi’s 2022 Form 10-K.
2023 YTD vs. 2022 YTD
Net income was $604 million, compared to a net loss of $84 million in the prior-year period, driven by higher revenues and lower expenses, partially offset by higher cost of credit.
Results for year-to-date 2023 included divestiture-related impacts of approximately $1.2 billion (approximately $770 million after-tax), reflecting the following:
•$1.4 billion of net divestiture gains, primarily related to the gain on sales of the India and Taiwan consumer banking businesses, recorded in Other revenue
•$266 million of aggregate divestiture-related expenses
•$(37) million benefit of divestiture-related credit costs
•$409 million of related taxes
Results for year-to-date 2022 included divestiture-related impacts of approximately $(110) million (approximately $(297) million after-tax), reflecting the following:
•$645 million of net divestiture gains, primarily related to a $616 million gain on sale of the Philippines consumer banking business, recorded in Other revenue in the third quarter of 2022
•$638 million of aggregate divestiture-related expenses, including a $535 million goodwill impairment in the first quarter of 2022
•$117 million of divestiture-related credit costs
•$187 million of related taxes
Revenues increased 9%, driven by higher revenues in Mexico Consumer/SBMM and Legacy Holdings Assets, partially offset by lower revenues in Asia Consumer.
Asia Consumer revenues decreased 13%, primarily driven by the reduction from exited markets and wind-downs, partially offset by higher gain on sale impacts in the current-year period. Mexico Consumer/SBMM revenues increased 24%, mainly due to the benefit of FX translation as well as higher interest rates and higher lending volumes. Legacy Holdings Assets revenues of $34 million increased from $(115) million in the prior-year period, primarily driven by the release of a CTA loss (net of hedges) recorded in AOCI in the second quarter of 2022.
Expenses decreased 11%, mainly driven by the absence of the goodwill impairment that occurred in the first quarter of 2022 and the impact of the exited markets and continued wind-downs.
Provisions were $833 million, compared to $448 million in the prior-year period, driven by higher lending volumes and net credit losses in Mexico Consumer, as well as a build for other assets, primarily related to an increase in transfer risk associated with exposures outside the U.S. driven by safety and soundness considerations under U.S. banking law.
CORPORATE/OTHER
Activities not assigned to the operating segments (ICG, PBWM and Legacy Franchises) are included in Corporate/Other. Corporate/Other included certain unallocated costs of global staff functions (including finance, risk, human resources, legal and compliance-related costs), other corporate expenses and unallocated global operations and technology expenses and income taxes, as well as results of Corporate Treasury investment activities and discontinued operations. For information on Citi’s planned revision to its financial reporting structure as of the end of the fourth quarter of 2023, including, among other things, the creation of a new All Other category, which will include Corporate/Other, see “Planned Revision to Operating Model and Financial Reporting Structure” above. At September 30, 2023, Corporate/Other had $95 billion in assets, including Corporate Treasury investment securities and the Company’s deferred tax assets (DTAs).
| Third Quarter | Nine Months | % Change | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| In millions of dollars | 2023 | 2022 | % Change | 2023 | 2022 | |||||||
| Net interest income | $ | 699 | $ | 772 | (9) | % | $ | 2,764 | $ | 1,367 | NM | |
| Non-interest revenue | (199) | (473) | 58 | (673) | (623) | (8) | % | |||||
| Total revenues, net of interest expense | $ | 500 | $ | 299 | 67 | % | $ | 2,091 | $ | 744 | NM | |
| Total operating expenses | $ | 237 | $ | 286 | (17) | % | $ | 849 | $ | 706 | 20 | % |
| Provisions for HTM debt securities and other assets | $ | (1) | $ | 3 | NM | $ | (3) | $ | 3 | NM | ||
| Income (loss) from continuing operations before taxes | $ | 264 | $ | 10 | NM | $ | 1,245 | $ | 35 | NM | ||
| Income taxes (benefits) | 74 | (211) | NM | 435 | (651) | NM | ||||||
| Income from continuing operations | $ | 190 | $ | 221 | (14) | % | $ | 810 | $ | 686 | 18 | % |
| Income (loss) from discontinued operations, net of taxes | 2 | (6) | NM | — | (229) | 100 | ||||||
| Net income before attribution to noncontrolling interests | $ | 192 | $ | 215 | (11) | % | $ | 810 | $ | 457 | 77 | % |
| Noncontrolling interests | 3 | 6 | NM | 10 | 9 | 11 | ||||||
| Net income | $ | 189 | $ | 209 | (10) | % | $ | 800 | $ | 448 | 79 | % |
NM Not meaningful
3Q23 vs. 3Q22
Net income was $189 million, compared to $209 million in the prior-year period. The decrease in net income was primarily driven by higher income tax expense due to the geographic mix of earnings, partially offset by higher revenues and lower expenses.
Revenues increased to $500 million, compared to $299 million in the prior-year period, largely driven by the absence of prior-year mark-to-market losses, primarily related to retained interchange litigation risk associated with shares of Visa B common stock that Citi previously sold.
Expenses were $237 million, compared to $286 million in the prior-year period, largely reflecting lower consulting expenses.
For additional information about trends, uncertainties and risks related to Corporate/Other’s future results, see “Executive Summary” above, “Forward-Looking Statements” below and “Risk Factors—Strategic Risks” in Citi’s 2022 Form 10-K.
2023 YTD vs. 2022 YTD
Net income was $800 million, compared to net income of $448 million in the prior-year period, largely driven by higher revenues and a prior-year release of a CTA loss (net of hedges) from AOCI (for additional information, see Note 2). The increase in net income was partially offset by higher income tax expense due to the geographic mix of earnings and lower discrete tax benefits as well as higher expenses.
Revenues increased to $2.1 billion, compared to $744 million in the prior-year period, largely driven by higher net interest income from Deposits with banks and the investment portfolio, largely due to higher interest rates.
Expenses were $849 million, compared to $706 million in the prior-year period, primarily reflecting higher severance costs, partially offset by lower consulting expenses.
CAPITAL RESOURCES
For additional information about capital resources, including Citi’s capital management, regulatory capital buffers, the stress testing component of capital planning and current regulatory capital standards and developments, see “Capital Resources” and “Risk Factors” in Citi’s 2022 Form 10-K.
During the third quarter of 2023, Citi returned a total of $1.5 billion of capital to common shareholders in the form of $1.0 billion in dividends and $0.5 billion in share repurchases (approximately 12 million common shares). For additional information, see “Unregistered Sales of Equity Securities, Repurchases of Equity Securities and Dividends” below.
Citi paid common dividends of $0.53 per share for the third quarter of 2023, and on October 19, 2023, declared common dividends of $0.53 per share for the fourth quarter of 2023. Citi intends to maintain a quarterly common dividend of at least $0.53 per share, subject to financial and macroeconomic conditions as well as its Board of Directors’ approval. In addition, as previously announced, Citi will continue to assess common share repurchases on a quarter-by-quarter basis given uncertainty regarding regulatory capital requirements. For additional information, see “Capital Resources—Regulatory Capital Standards and Developments” below.
Common Equity Tier 1 Capital Ratio
Citi’s Common Equity Tier 1 (CET1) Capital ratio under the Basel III Standardized Approach was 13.6% as of September 30, 2023, compared to 13.4% as of June 30, 2023, relative to a required regulatory CET1 Capital ratio of 12.0% as of such dates under the Standardized Approach. This compares to a CET1 Capital ratio of 13.0% as of December 31, 2022, relative to a required regulatory CET1 Capital ratio of 11.5% as of such date under the Standardized Approach.
Citi’s CET1 Capital ratio under the Basel III Advanced Approaches was 12.5% as of September 30, 2023, largely unchanged from June 30, 2023, relative to a required regulatory CET1 Capital ratio of 10.5% as of such dates under the Advanced Approaches framework. This compares to a CET1 Capital ratio of 12.1% as of December 31, 2022, relative to a required regulatory CET1 Capital ratio of 10.0% as of such date under the Advanced Approaches.
Citi’s CET1 Capital ratio increased under the Standardized Approach from June 30, 2023, driven primarily by net income and impacts from the sales of Asia Consumer businesses, partially offset by the return of capital to common shareholders. Citi’s CET1 Capital ratio increased under both the Standardized Approach and Advanced Approaches from year-end 2022, driven primarily by year-to-date net income of $11.1 billion and impacts from the sales of Asia Consumer businesses, partially offset by the return of capital to common shareholders. The increase in the CET1 Capital ratio under the Advanced Approaches was also partially offset by an increase in Advanced Approaches RWA.
Stress Capital Buffer
In July 2023, the Federal Reserve Board confirmed Citi’s Stress Capital Buffer (SCB) requirement of 4.3%, increased from 4.0%, for the four-quarter window starting from October 1, 2023 to September 30, 2024.
Accordingly, as of October 1, 2023, Citi’s required regulatory CET1 Capital ratio increased to 12.3% from 12.0% under the Standardized Approach, incorporating the 4.3% SCB and its current GSIB surcharge of 3.5%. Citi’s required regulatory CET1 Capital ratio under the Advanced Approaches (using the fixed 2.5% Capital Conservation Buffer) remains unchanged at 10.5%. The SCB applies to Citigroup only; the regulatory capital framework applicable to Citibank, including the Capital Conservation Buffer, is unaffected by Citigroup’s SCB.
For additional information regarding regulatory capital buffers, including the SCB and GSIB surcharge, see “Capital Resources—Regulatory Capital Buffers” in Citi’s 2022 Form 10-K.
Citigroup’s Capital Resources
The following table presents Citi’s required risk-based capital ratios as of September 30, 2023, June 30, 2023 and December 31, 2022:
| Advanced Approaches | Standardized Approach(1) | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30,<br>2023 | June 30,<br>2023 | December 31,<br>2022 | September 30,<br>2023 | June 30,<br>2023 | December 31,<br>2022 | |||||||
| CET1 Capital ratio(2) | 10.5 | % | 10.5 | % | 10.0 | % | 12.0 | % | 12.0 | % | 11.5 | % |
| Tier 1 Capital ratio(2) | 12.0 | 12.0 | 11.5 | 13.5 | 13.5 | 13.0 | ||||||
| Total Capital ratio(2) | 14.0 | 14.0 | 13.5 | 15.5 | 15.5 | 15.0 |
(1)As of October 1, 2023, Citi’s required regulatory CET1 Capital ratio increased from 12.0% to 12.3% under the Standardized Approach, incorporating the 4.3% SCB and its current GSIB surcharge of 3.5%.
(2)As of January 1, 2023, Citi’s required risk-based capital ratios included the 4.0% SCB and 3.5% GSIB surcharge under the Standardized Approach, and the 2.5% Capital Conservation Buffer and 3.5% GSIB surcharge under the Advanced Approaches (all of which must be composed of CET1 Capital). These requirements were applicable through September 30, 2023. See “Stress Capital Buffer” above for more information.
The following tables present Citi’s capital components and ratios as of September 30, 2023, June 30, 2023 and December 31, 2022:
| Advanced Approaches | Standardized Approach | ||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| In millions of dollars, except ratios | September 30,<br>2023 | June 30,<br>2023 | December 31,<br>2022 | September 30,<br>2023 | June 30,<br>2023 | December 31,<br>2022 | |||||||||||||||||||||||||
| CET1 Capital(1) | $ | 156,134 | $ | 154,243 | $ | 148,930 | $ | 156,134 | $ | 154,243 | $ | 148,930 | |||||||||||||||||||
| Tier 1 Capital(1) | 176,878 | 175,743 | 169,145 | 176,878 | 175,743 | 169,145 | |||||||||||||||||||||||||
| Total Capital (Tier 1 Capital + Tier 2 Capital)(1)(5) | 197,219 | 198,036 | 188,889 | 205,932 | 206,852 | 197,578 | |||||||||||||||||||||||||
| Total Risk-Weighted Assets(5) | 1,249,606 | 1,234,271 | 1,233,138 | 1,148,550 | 1,153,450 | 1,148,678 | |||||||||||||||||||||||||
| Credit Risk(1)(5) | $ | 892,423 | $ | 874,707 | $ | 860,515 | $ | 1,087,701 | $ | 1,090,440 | $ | 1,072,777 | |||||||||||||||||||
| Market Risk(5) | 59,880 | 62,261 | 74,849 | 60,849 | 63,010 | 75,901 | |||||||||||||||||||||||||
| Operational Risk | 297,303 | 297,303 | 297,774 | — | — | — | |||||||||||||||||||||||||
| CET1 Capital ratio(2)(5) | 12.49 | % | 12.50 | % | 12.08 | % | 13.59 | % | 13.37 | % | 12.97 | % | |||||||||||||||||||
| Tier 1 Capital ratio(2)(5) | 14.15 | 14.24 | 13.72 | 15.40 | 15.24 | 14.73 | |||||||||||||||||||||||||
| Total Capital ratio(2)(5) | 15.78 | 16.04 | 15.32 | 17.93 | 17.93 | 17.20 | In millions of dollars, except ratios | Required <br>Capital Ratios | September 30, 2023 | June 30, 2023 | December 31, 2022 | ||||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||||||||||||||||||
| Quarterly Adjusted Average Total Assets(1)(3) | $ | 2,378,887 | $ | 2,429,306 | $ | 2,395,863 | |||||||||||||||||||||||||
| Total Leverage Exposure(1)(4) | 2,927,392 | 2,943,546 | 2,906,773 | ||||||||||||||||||||||||||||
| Leverage ratio | 4.0 | % | 7.44 | % | 7.23 | % | 7.06 | % | |||||||||||||||||||||||
| Supplementary Leverage ratio | 5.0 | 6.04 | 5.97 | 5.82 |
(1)Citi’s regulatory capital ratios and components reflect certain deferrals based on the modified regulatory capital transition provision related to the current expected credit losses (CECL) standard. For additional information, see “Capital Resources—Regulatory Capital Treatment—Modified Transition of the Current Expected Credit Losses Methodology” in Citi’s 2022 Form 10-K.
(2)Citi’s binding CET1 Capital and Tier 1 Capital ratios were derived under the Basel III Standardized Approach, whereas Citi’s binding Total Capital ratio was derived under the Basel III Advanced Approaches framework for all periods presented.
(3)Leverage ratio denominator. Represents quarterly average total assets less amounts deducted from Tier 1 Capital.
(4)Supplementary Leverage ratio denominator.
(5)Certain of the above prior-period amounts have been revised to conform with enhancements made in the current period.
As indicated in the table above, Citigroup’s capital ratios at September 30, 2023 were in excess of the regulatory capital requirements under the U.S. Basel III rules. In addition, Citi was “well capitalized” under current federal bank regulatory agencies definitions as of September 30, 2023.
Components of Citigroup Capital
| In millions of dollars | September 30,<br>2023 | December 31,<br>2022 | ||
|---|---|---|---|---|
| CET1 Capital | ||||
| Citigroup common stockholders’ equity(1) | $ | 190,134 | $ | 182,325 |
| Add: Qualifying noncontrolling interests | 193 | 128 | ||
| Regulatory capital adjustments and deductions: | ||||
| Add: CECL transition provision(2) | 1,514 | 2,271 | ||
| Less: Accumulated net unrealized gains (losses) on cash flow hedges, net of tax | (1,259) | (2,522) | ||
| Less: Cumulative unrealized net gain (loss) related to changes in fair value of financial liabilities attributable to own creditworthiness, net of tax | 625 | 1,441 | ||
| Less: Intangible assets: | ||||
| Goodwill, net of related DTLs(3) | 18,552 | 19,007 | ||
| Identifiable intangible assets other than MSRs, net of related DTLs | 3,444 | 3,411 | ||
| Less: Defined benefit pension plan net assets; other | 1,340 | 1,935 | ||
| Less: DTAs arising from net operating loss, foreign tax credit and general business credit<br><br>carry-forwards(4) | 11,219 | 12,197 | ||
| Less: Excess over 10%/15% limitations for other DTAs, certain common stock investments,<br><br>and MSRs(4)(5) | 1,786 | 325 | ||
| Total CET1 Capital (Standardized Approach and Advanced Approaches) | $ | 156,134 | $ | 148,930 |
| Additional Tier 1 Capital | ||||
| Qualifying noncumulative perpetual preferred stock(1) | $ | 19,369 | $ | 18,864 |
| Qualifying trust preferred securities(6) | 1,412 | 1,406 | ||
| Qualifying noncontrolling interests | 28 | 30 | ||
| Regulatory capital deductions: | ||||
| Less: Other | 65 | 85 | ||
| Total Additional Tier 1 Capital (Standardized Approach and Advanced Approaches) | $ | 20,744 | $ | 20,215 |
| Total Tier 1 Capital (CET1 Capital + Additional Tier 1 Capital)<br><br>(Standardized Approach and Advanced Approaches) | $ | 176,878 | $ | 169,145 |
| Tier 2 Capital | ||||
| Qualifying subordinated debt | $ | 16,112 | $ | 15,530 |
| Qualifying noncontrolling interests | 34 | 37 | ||
| Eligible allowance for credit losses(2)(7)(8) | 13,688 | 13,461 | ||
| Regulatory capital deduction: | ||||
| Less: Other | 780 | 595 | ||
| Total Tier 2 Capital (Standardized Approach)(8) | $ | 29,054 | $ | 28,433 |
| Total Capital (Tier 1 Capital + Tier 2 Capital) (Standardized Approach)(8) | $ | 205,932 | $ | 197,578 |
| Adjustment for excess of eligible credit reserves over expected credit losses(2)(7)(8) | $ | (8,713) | $ | (8,689) |
| Total Tier 2 Capital (Advanced Approaches)(8) | $ | 20,341 | $ | 19,744 |
| Total Capital (Tier 1 Capital + Tier 2 Capital) (Advanced Approaches)(8) | $ | 197,219 | $ | 188,889 |
(1)Issuance costs of $126 million and $131 million related to outstanding noncumulative perpetual preferred stock at September 30, 2023 and December 31, 2022, respectively, were excluded from common stockholders’ equity and netted against such preferred stock in accordance with Federal Reserve Board regulatory reporting requirements, which differ from those under U.S. GAAP.
(2)Citi’s regulatory capital ratios and components reflect certain deferrals based on the modified regulatory capital transition provision related to the CECL standard. For additional information, see “Capital Resources—Regulatory Capital Treatment—Modified Transition of the Current Expected Credit Losses Methodology” in Citi’s 2022 Form 10-K.
(3)Includes goodwill “embedded” in the valuation of significant common stock investments in unconsolidated financial institutions.
(4)Of Citi’s $28.3 billion of net DTAs at September 30, 2023, $11.2 billion of net DTAs arising from net operating loss, foreign tax credit and general business credit tax carry-forwards, as well as $1.8 billion of DTAs arising from temporary differences that exceeded 10%/15% limitations, were excluded from Citi’s CET1 Capital as of September 30, 2023. DTAs arising from net operating loss, foreign tax credit and general business credit tax carry-forwards are required to be entirely deducted from CET1 Capital under the U.S. Basel III rules. DTAs arising from temporary differences are required to be deducted from capital only if they exceed 10%/15% limitations under the U.S. Basel III rules.
Footnotes continue on the following page.
(5)Assets subject to 10%/15% limitations include MSRs, DTAs arising from temporary differences and significant common stock investments in unconsolidated financial institutions. At September 30, 2023 and December 31, 2022, this deduction related only to DTAs arising from temporary differences that exceeded the 10% limitation.
(6)Represents Citigroup Capital XIII trust preferred securities, which are permanently grandfathered as Tier 1 Capital under the U.S. Basel III rules.
(7)Under the Standardized Approach, the allowance for credit losses is eligible for inclusion in Tier 2 Capital up to 1.25% of credit risk-weighted assets, with any excess allowance for credit losses being deducted in arriving at credit risk-weighted assets, which differs from the Advanced Approaches framework, in which eligible credit reserves that exceed expected credit losses are eligible for inclusion in Tier 2 Capital to the extent that the excess reserves do not exceed 0.6% of credit risk-weighted assets. The total amount of eligible credit reserves in excess of expected credit losses that were eligible for inclusion in Tier 2 Capital, subject to limitation, under the Advanced Approaches framework were $5.0 billion and $4.8 billion at September 30, 2023 and December 31, 2022, respectively.
(8)Certain of the above prior-period amounts have been revised to conform with enhancements made in the current period.
Citigroup Capital Rollforward
| In millions of dollars | Three Months Ended<br>September 30, 2023 | Nine Months Ended September 30, 2023 | ||
|---|---|---|---|---|
| CET1 Capital, beginning of period | $ | 154,243 | $ | 148,930 |
| Net income | 3,546 | 11,067 | ||
| Common and preferred dividends declared | (1,371) | (3,940) | ||
| Net increase in treasury stock | (491) | (771) | ||
| Net increase in common stock and additional paid-in capital | 168 | 294 | ||
| Net change in CTA net of hedges, net of tax | (1,496) | (631) | ||
| Net change in unrealized gains (losses) on debt securities AFS, net of tax | (169) | 793 | ||
| Net decrease in defined benefit plans liability adjustment, net of tax | 312 | 72 | ||
| Net change in adjustment related to change in fair value of financial liabilities attributable to own creditworthiness, net of tax | (19) | 170 | ||
| Net change in other Accumulated other comprehensive income (loss) (AOCI) | 11 | 34 | ||
| Net decrease in goodwill, net of related DTLs | 381 | 455 | ||
| Net change in identifiable intangible assets other than MSRs, net of related DTLs | 87 | (33) | ||
| Net decrease in defined benefit pension plan net assets | 663 | 604 | ||
| Net decrease in DTAs arising from net operating loss, foreign tax credit and general business credit carry-forwards | 242 | 978 | ||
| Net change in excess over 10%/15% limitations for other DTAs, certain common stock investments and MSRs | 42 | (1,461) | ||
| Net decrease in CECL transition provision | — | (757) | ||
| Other | (15) | 330 | ||
| Net increase in CET1 Capital | $ | 1,891 | $ | 7,204 |
| CET1 Capital, end of period<br><br>(Standardized Approach and Advanced Approaches) | $ | 156,134 | $ | 156,134 |
| Additional Tier 1 Capital, beginning of period | $ | 21,500 | $ | 20,215 |
| Net change in qualifying perpetual preferred stock | (740) | 505 | ||
| Net increase in qualifying trust preferred securities | 2 | 6 | ||
| Other | (18) | 18 | ||
| Net change in Additional Tier 1 Capital | $ | (756) | $ | 529 |
| Tier 1 Capital, end of period<br><br>(Standardized Approach and Advanced Approaches) | $ | 176,878 | $ | 176,878 |
| Tier 2 Capital, beginning of period (Standardized Approach)(1) | $ | 31,109 | $ | 28,433 |
| Net change in qualifying subordinated debt | (1,557) | 582 | ||
| Net change in eligible allowance for credit losses | (27) | 227 | ||
| Other | (471) | (188) | ||
| Net change in Tier 2 Capital (Standardized Approach) | $ | (2,055) | $ | 621 |
| Tier 2 Capital, end of period (Standardized Approach) | $ | 29,054 | $ | 29,054 |
| Total Capital, end of period (Standardized Approach) | $ | 205,932 | $ | 205,932 |
| Tier 2 Capital, beginning of period (Advanced Approaches)(1) | $ | 22,293 | $ | 19,744 |
| Net change in qualifying subordinated debt | (1,557) | 582 | ||
| Net increase in excess of eligible credit reserves over expected credit losses | 76 | 203 | ||
| Other | (471) | (188) | ||
| Net change in Tier 2 Capital (Advanced Approaches) | $ | (1,952) | $ | 597 |
| Tier 2 Capital, end of period (Advanced Approaches) | $ | 20,341 | $ | 20,341 |
| Total Capital, end of period (Advanced Approaches) | $ | 197,219 | $ | 197,219 |
(1)Certain of the above prior-period amounts have been revised to conform with enhancements made in the current period.
Citigroup Risk-Weighted Assets Rollforward (Basel III Standardized Approach)
| In millions of dollars | Three Months Ended<br>September 30, 2023 | Nine Months Ended September 30, 2023 | ||
|---|---|---|---|---|
| Total Risk-Weighted Assets, beginning of period(1) | $ | 1,153,450 | $ | 1,148,678 |
| Changes in Credit Risk-Weighted Assets | ||||
| General credit risk exposures(2) | (1,853) | (8,015) | ||
| Derivatives(3) | (2,447) | 3,509 | ||
| Repo-style transactions(4) | (1,571) | 10,032 | ||
| Securitization exposures | 447 | 539 | ||
| Equity exposures(5) | 108 | 2,485 | ||
| Other exposures(6) | 2,577 | 6,374 | ||
| Net change in Credit Risk-Weighted Assets | $ | (2,739) | $ | 14,924 |
| Changes in Market Risk-Weighted Assets | ||||
| Risk levels | $ | (1,964) | $ | (7,749) |
| Model and methodology updates | (197) | (7,303) | ||
| Net decrease in Market Risk-Weighted Assets(7) | $ | (2,161) | $ | (15,052) |
| Total Risk-Weighted Assets, end of period | $ | 1,148,550 | $ | 1,148,550 |
(1)Certain of the above prior-period amounts have been revised to conform with enhancements made in the current period.
(2)General credit risk exposures include cash and balances due from depository institutions, securities, and loans and leases. General credit risk exposures decreased during the nine months ended September 30, 2023, primarily driven by divestitures and non-strategic portfolio exits.
(3)Derivative exposures decreased during the three months ended September 30, 2023, primarily driven by reduced exposures in FX. Derivative exposures increased during the nine months ended September 30, 2023, mainly driven by movements in rates and currencies.
(4)Repo-style transactions include repurchase and reverse repurchase transactions, as well as securities borrowing and securities lending transactions. Repo-style transactions increased during the nine months ended September 30, 2023, mainly due to increased business activities.
(5)Equity exposures increased during the nine months ended September 30, 2023, primarily due to increases in investment market share prices.
(6)Other exposures increased during the three and nine months ended September 30, 2023, mainly driven by increases across accounts receivables, prepaid expenses and other assets.
(7)Market risk-weighted assets decreased during the three and nine months ended September 30, 2023, primarily due to exposure changes and changes in model inputs related to volatility and correlation between market risk factors.
Citigroup Risk-Weighted Assets Rollforward (Basel III Advanced Approaches)
| In millions of dollars | Three Months Ended<br>September 30, 2023 | Nine Months Ended September 30, 2023 | ||
|---|---|---|---|---|
| Total Risk-Weighted Assets, beginning of period(1) | $ | 1,234,271 | $ | 1,233,138 |
| Changes in Credit Risk-Weighted Assets | ||||
| General credit risk exposures(2) | 9,320 | 22,450 | ||
| Derivatives(3) | 5,161 | (6,228) | ||
| Repo-style transactions(4) | (806) | 1,698 | ||
| Securitization exposures | 446 | 1,407 | ||
| Equity exposures(5) | (77) | 2,751 | ||
| Other exposures(6) | 3,672 | 9,830 | ||
| Net increase in Credit Risk-Weighted Assets | $ | 17,716 | $ | 31,908 |
| Changes in Market Risk-Weighted Assets | ||||
| Risk levels | $ | (2,184) | $ | (7,666) |
| Model and methodology updates | (197) | (7,303) | ||
| Net decrease in Market Risk-Weighted Assets(7) | $ | (2,381) | $ | (14,969) |
| Net decrease in Operational Risk-Weighted Assets | $ | — | $ | (471) |
| Total Risk-Weighted Assets, end of period | $ | 1,249,606 | $ | 1,249,606 |
(1)Certain of the above prior-period amounts have been revised to conform with enhancements made in the current period.
(2)General credit risk exposures decreased during the three and nine months ended September 30, 2023, mainly driven by lending as well as card activities.
(3)Derivative exposures increased during the three months ended September 30, 2023, primarily due to an increase in CVA. Derivative exposures decreased during the nine months ended September 30, 2023, driven by reductions across default risk and CVA.
(4)Repo-style transactions increased during the nine months ended September 30, 2023, mainly due to increased business activities.
(5)Equity exposures increased during the nine months ended September 30, 2023, primarily due to increases in investment market share prices.
(6)Other exposures increased during the three and nine months ended September 30, 2023, mainly driven by increases across accounts receivables, prepaid expenses and other assets.
(7)Market risk-weighted assets decreased during the three and nine months ended September 30, 2023, primarily due to exposure changes and changes in model inputs related to volatility and correlation between market risk factors.
Supplementary Leverage Ratio
The following table presents Citi’s Supplementary Leverage ratio and related components as of September 30, 2023, June 30, 2023 and December 31, 2022:
| In millions of dollars, except ratios | September 30, 2023 | June 30, 2023 | December 31, 2022 | ||||||
|---|---|---|---|---|---|---|---|---|---|
| Tier 1 Capital | $ | 176,878 | $ | 175,743 | $ | 169,145 | |||
| Total Leverage Exposure | |||||||||
| On-balance sheet assets(1)(2) | $ | 2,415,293 | $ | 2,467,128 | $ | 2,432,823 | |||
| Certain off-balance sheet exposures(3) | |||||||||
| Potential future exposure on derivative contracts | 154,202 | 144,823 | 133,071 | ||||||
| Effective notional of sold credit derivatives, net(4) | 32,784 | 31,833 | 34,117 | ||||||
| Counterparty credit risk for repo-style transactions(5) | 21,199 | 19,399 | 17,169 | ||||||
| Other off-balance sheet exposures | 340,320 | 318,185 | 326,553 | ||||||
| Total of certain off-balance sheet exposures | $ | 548,505 | $ | 514,240 | $ | 510,910 | |||
| Less: Tier 1 Capital deductions | 36,406 | 37,822 | 36,960 | ||||||
| Total Leverage Exposure | $ | 2,927,392 | $ | 2,943,546 | $ | 2,906,773 | |||
| Supplementary Leverage ratio | 6.04 | % | 5.97 | % | 5.82 | % |
(1)Represents the daily average of on-balance sheet assets for the quarter.
(2)Citi’s regulatory capital ratios and components reflect certain deferrals based on the modified regulatory capital transition provision related to the CECL standard. For additional information, see “Capital Resources—Regulatory Capital Treatment—Modified Transition of the Current Expected Credit Losses Methodology” in Citi’s 2022 Form 10-K.
(3)Represents the average of certain off-balance sheet exposures calculated as of the last day of each month in the quarter.
(4)Under the U.S. Basel III rules, banking organizations are required to include in Total Leverage Exposure the effective notional amount of sold credit derivatives, with netting of exposures permitted if certain conditions are met.
(5)Repo-style transactions include repurchase and reverse repurchase transactions as well as securities borrowing and securities lending transactions.
As presented in the table above, Citigroup’s Supplementary Leverage ratio was approximately 6.0% at September 30, 2023 and June 30, 2023, compared to 5.8% at December 31, 2022. The increase from the fourth quarter of 2022 was primarily driven by an increase in Tier 1 Capital due to net income of $11.1 billion, partially offset by dividends and an increase in Total Leverage Exposure.
Capital Resources of Citigroup’s Subsidiary U.S. Depository Institutions
Citigroup’s subsidiary U.S. depository institutions are also subject to regulatory capital standards issued by their respective primary bank regulatory agencies, which are similar to the standards of the Federal Reserve Board.
The following tables present the capital components and ratios for Citibank, Citi’s primary subsidiary U.S. depository institution, as of September 30, 2023, June 30, 2023 and December 31, 2022:
| Advanced Approaches | Standardized Approach | ||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| In millions of dollars, except ratios | Required Capital Ratios(1) | September 30,<br>2023 | June 30,<br>2023 | December 31,<br>2022 | September 30,<br>2023 | June 30,<br>2023 | December 31,<br>2022 | ||||||||||||||||||||||||||
| CET1 Capital(2) | $ | 150,635 | $ | 150,482 | $ | 149,593 | $ | 150,635 | $ | 150,482 | $ | 149,593 | |||||||||||||||||||||
| Tier 1 Capital(2) | 152,763 | 152,612 | 151,720 | 152,763 | 152,612 | 151,720 | |||||||||||||||||||||||||||
| Total Capital (Tier 1 Capital + Tier 2 Capital)(2)(3)(8) | 165,977 | 165,840 | 165,141 | 173,610 | 173,517 | 172,647 | |||||||||||||||||||||||||||
| Total Risk-Weighted Assets(8) | 1,027,427 | 1,041,217 | 1,008,736 | 976,833 | 986,744 | 986,187 | |||||||||||||||||||||||||||
| Credit Risk(2)(8) | $ | 750,046 | $ | 758,445 | $ | 729,798 | $ | 940,019 | $ | 944,565 | $ | 948,150 | |||||||||||||||||||||
| Market Risk(8) | 36,667 | 42,058 | 37,676 | 36,814 | 42,179 | 38,037 | |||||||||||||||||||||||||||
| Operational Risk | 240,714 | 240,714 | 241,262 | — | — | — | |||||||||||||||||||||||||||
| CET1 Capital ratio(4)(5)(8) | 7.0 | % | 14.66 | % | 14.45 | % | 14.83 | % | 15.42 | % | 15.25 | % | 15.17 | % | |||||||||||||||||||
| Tier 1 Capital ratio(4)(5)(8) | 8.5 | 14.87 | 14.66 | 15.04 | 15.64 | 15.47 | 15.38 | ||||||||||||||||||||||||||
| Total Capital ratio(4)(5)(8) | 10.5 | 16.15 | 15.93 | 16.37 | 17.77 | 17.58 | 17.51 | In millions of dollars, except ratios | Required <br>Capital Ratios | September 30, 2023 | June 30, 2023 | December 31, 2022 | |||||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||||||||||||||||||||
| Quarterly Adjusted Average Total Assets(2)(6) | $ | 1,666,706 | $ | 1,716,982 | $ | 1,738,744 | |||||||||||||||||||||||||||
| Total Leverage Exposure(2)(7) | 2,139,843 | 2,162,693 | 2,189,541 | ||||||||||||||||||||||||||||||
| Leverage ratio(5) | 5.0 | % | 9.17 | % | 8.89 | % | 8.73 | % | |||||||||||||||||||||||||
| Supplementary Leverage ratio(5) | 6.0 | 7.14 | 7.06 | 6.93 |
(1)Citibank’s required risk-based capital ratios are inclusive of the 2.5% Capital Conservation Buffer (all of which must be composed of CET1 Capital).
(2)Citibank’s regulatory capital ratios and components reflect certain deferrals based on the modified regulatory capital transition provision related to the CECL standard. For additional information, see “Capital Resources—Regulatory Capital Treatment—Modified Transition of the Current Expected Credit Losses Methodology” in Citi’s 2022 Form 10-K.
(3)Under the Standardized Approach, the allowance for credit losses is eligible for inclusion in Tier 2 Capital up to 1.25% of credit risk-weighted assets, with any excess allowance for credit losses being deducted in arriving at credit risk-weighted assets, which differs from the Advanced Approaches framework, in which eligible credit reserves that exceed expected credit losses are eligible for inclusion in Tier 2 Capital to the extent that the excess reserves do not exceed 0.6% of credit risk-weighted assets.
(4)Citibank’s binding CET1 Capital, Tier 1 Capital and Total Capital ratios were derived under the Basel III Advanced Approaches framework for all periods presented.
(5)Citibank must maintain required CET1 Capital, Tier 1 Capital, Total Capital and Leverage ratios of 6.5%, 8.0%, 10.0% and 5.0%, respectively, to be considered “well capitalized” under the revised Prompt Corrective Action (PCA) regulations applicable to insured depository institutions as established by the U.S. Basel III rules. Citibank must also maintain a required Supplementary Leverage ratio of 6.0% to be considered “well capitalized.”
(6)Leverage ratio denominator. Represents quarterly average total assets less amounts deducted from Tier 1 Capital.
(7)Supplementary Leverage ratio denominator.
(8)Certain of the above prior-period amounts have been revised to conform with enhancements made in the current period.
As presented in the table above, Citibank’s capital ratios at September 30, 2023 were in excess of the regulatory capital requirements under the U.S. Basel III rules. In addition, Citibank was “well capitalized” as of September 30, 2023.
Citibank’s Supplementary Leverage ratio was 7.1% at September 30, 2023 and June 30, 2023, compared to 6.9% at December 31, 2022. The year-to-date increase was driven by a decrease in Total Leverage Exposure, primarily due to lower average on-balance sheet assets, and an increase in Tier 1 Capital due to net income in 2023, partially offset by dividends.
Impact of Changes on Citigroup and Citibank Capital Ratios
The following tables present the estimated sensitivity of Citigroup’s and Citibank’s capital ratios to changes of $100 million in CET1 Capital, Tier 1 Capital and Total Capital (numerator), and changes of $1 billion in Advanced Approaches and Standardized Approach risk-weighted assets and quarterly adjusted average total assets, as well as Total Leverage Exposure (denominator), as of September 30, 2023. This information is provided for the purpose of analyzing the impact that a change in Citigroup’s or Citibank’s financial position or results of operations could have on these ratios. These sensitivities only consider a single change to either a component of capital, risk-weighted assets, quarterly adjusted average total assets or Total Leverage Exposure. Accordingly, an event that affects more than one factor may have a larger basis point impact than is reflected in these tables.
| Common Equity<br><br>Tier 1 Capital ratio | Tier 1 Capital ratio | Total Capital ratio | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| In basis points | Impact of<br><br>$100 million<br><br>change in<br><br>Common Equity<br><br>Tier 1 Capital | Impact of<br><br>$1 billion<br><br>change in risk-<br><br>weighted assets | Impact of<br><br>$100 million<br><br>change in<br><br>Tier 1 Capital | Impact of<br><br>$1 billion<br><br>change in risk-<br><br>weighted assets | Impact of<br><br>$100 million<br><br>change in<br><br>Total Capital | Impact of<br><br>$1 billion<br><br>change in risk-<br><br>weighted assets | ||||||
| Citigroup | ||||||||||||
| Advanced Approaches | 0.8 | 1.0 | 0.8 | 1.1 | 0.8 | 1.3 | ||||||
| Standardized Approach | 0.9 | 1.2 | 0.9 | 1.3 | 0.9 | 1.6 | ||||||
| Citibank | ||||||||||||
| Advanced Approaches | 1.0 | 1.4 | 1.0 | 1.4 | 1.0 | 1.6 | ||||||
| Standardized Approach | 1.0 | 1.6 | 1.0 | 1.6 | 1.0 | 1.8 | Leverage ratio | Supplementary Leverage ratio | ||||
| --- | --- | --- | --- | --- | ||||||||
| In basis points | Impact of<br><br>$100 million<br><br>change in<br><br>Tier 1 Capital | Impact of<br><br>$1 billion change in quarterly adjusted average total assets | Impact of<br><br>$100 million<br><br>change in<br><br>Tier 1 Capital | Impact of<br><br>$1 billion change in Total Leverage Exposure | ||||||||
| Citigroup | 0.4 | 0.3 | 0.3 | 0.2 | ||||||||
| Citibank | 0.6 | 0.6 | 0.5 | 0.3 |
Citigroup Broker-Dealer Subsidiaries
At September 30, 2023, Citigroup Global Markets Inc., a U.S. broker-dealer registered with the SEC that is an indirect wholly owned subsidiary of Citigroup, had net capital, computed in accordance with the SEC’s net capital rule, of $16 billion, which exceeded the minimum requirement by $12 billion.
Moreover, Citigroup Global Markets Limited, a broker-dealer registered with the United Kingdom’s Prudential Regulation Authority (PRA) that is also an indirect wholly owned subsidiary of Citigroup, had total regulatory capital of $27 billion at September 30, 2023, which exceeded the PRA’s minimum regulatory capital requirements.
In addition, certain of Citi’s other broker-dealer subsidiaries are subject to regulation in the countries in which they do business, including requirements to maintain specified levels of net capital or its equivalent. Citigroup’s other principal broker-dealer subsidiaries were in compliance with their regulatory capital requirements at September 30, 2023.
Total Loss-Absorbing Capacity (TLAC)
The table below details Citi’s eligible external TLAC and long-term debt (LTD) amounts and ratios, and each TLAC and LTD regulatory requirement, as well as the surplus amount in dollars in excess of each requirement:
| September 30, 2023 | ||||||
|---|---|---|---|---|---|---|
| In billions of dollars, except ratios | External TLAC | LTD | ||||
| Total eligible amount | $ | 337 | $ | 152 | ||
| % of Advanced Approaches risk-<br>weighted assets | 27.0 | % | 12.1 | % | ||
| Regulatory requirement(1)(2) | 22.5 | 9.5 | ||||
| Surplus amount | $ | 56 | $ | 33 | ||
| % of Total Leverage Exposure | 11.5 | % | 5.2 | % | ||
| Regulatory requirement | 9.5 | 4.5 | ||||
| Surplus amount | $ | 59 | $ | 20 |
(1) External TLAC includes method 1 GSIB surcharge of 2.0%.
(2) LTD includes method 2 GSIB surcharge of 3.5%.
As of September 30, 2023, Citi exceeded each of the TLAC and LTD regulatory requirements, resulting in a $20 billion surplus above its binding TLAC requirement of LTD as a percentage of Total Leverage Exposure.
For additional information on Citi’s TLAC-related requirements, see “Capital Resources—Total Loss-Absorbing Capacity (TLAC)” in Citi’s 2022 Form 10-K.
Capital Resources (Full Adoption of CECL)(1)
The following tables present Citigroup’s and Citibank’s capital components and ratios under a hypothetical scenario where the full impact of CECL is reflected as of September 30, 2023:
| Citigroup | Citibank | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Required Capital Ratios, Advanced Approaches | Required Capital Ratios, Standardized Approach | Advanced Approaches | Standardized Approach | Required Capital Ratios(2) | Advanced Approaches | Standardized Approach | ||||||||
| CET1 Capital ratio | 10.5 | % | 12.0 | % | 12.35 | % | 13.44 | % | 7.0 | % | 14.53 | % | 15.28 | % |
| Tier 1 Capital ratio | 12.0 | 13.5 | 14.01 | 15.24 | 8.5 | 14.74 | 15.50 | |||||||
| Total Capital ratio | 14.0 | 15.5 | 15.64 | 17.78 | 10.5 | 16.02 | 17.64 | |||||||
| Required Capital Ratios | Citigroup | Required Capital Ratios | Citibank | |||||||||||
| --- | --- | --- | --- | --- | --- | --- | ||||||||
| Leverage ratio | 4.0 | % | 7.35 % | 5.0 | % | 9.09 % | ||||||||
| Supplementary Leverage ratio | 5.0 | 5.97 | 6.0 | 7.08 |
(1)See footnote 2 on the “Components of Citigroup Capital” table above.
(2)Citibank’s required capital ratios were the same under the Standardized Approach and the Advanced Approaches framework.
Regulatory Capital Standards and Developments
Basel III Revisions
On July 27, 2023, the U.S. banking agencies issued a notice of proposed rulemaking, known as the Basel III Endgame (capital proposal), that would amend U.S. regulatory capital requirements.
The capital proposal would maintain the current capital rule’s dual-requirement structure for risk-weighted assets but would eliminate the use of internal models to calculate credit risk and operational risk components of risk-weighted assets. Large banking organizations, such as Citi, would be required to calculate their risk-based capital ratios under both the new expanded risk-based approach and the Standardized Approach and use the lower of the two for each risk-based capital ratio for determining the binding constraints.
The expanded risk-based approach is designed to align with the international capital standards adopted by the Basel Committee on Banking Supervision (Basel Committee). The Basel Committee finalized the Basel III reforms in December 2017, which included revisions to the methodologies to determine credit, market and operational risk-weighted asset amounts.
If adopted as proposed, the capital proposal’s impact on risk-weighted asset amounts would also affect several other requirements including TLAC, external long-term debt and the short-term wholesale funding score included in the GSIB surcharge under method 2 (see “GSIB Surcharge” below for additional changes in that area). The proposal has a three-year transition period that would begin on July 1, 2025. Citi is currently reviewing the proposal and participating in the comment period. For additional information, see “Executive Summary” above.
GSIB Surcharge
Separately, the Federal Reserve Board proposed changes to the GSIB surcharge rule that aim to make it more risk sensitive. Proposed changes include measuring certain systemic indicators on a daily versus quarterly average basis, changing certain of the risk indicators and shortening the time to come into compliance with each year’s surcharge. In addition, the proposal would narrow surcharge bands under method 2 from 50 bps to 10 bps to reduce cliff effects when moving between bands. This proposal is also subject to a comment period and provides that it would be effective two full calendar quarters after its finalization.
Long-Term Debt Requirements
On August 29, 2023, the Federal Reserve Board issued a notice of proposed rulemaking to amend the TLAC rule to change the haircuts (i.e., the percentage reductions) that are applied to eligible long-term debt. The proposed revisions are estimated to decrease the TLAC percentage of Advanced Approaches RWA as well as the TLAC percentage of Total Leverage Exposure. This proposal, which Citi is currently reviewing, is subject to a comment period and there is no proposed transition period for its implementation. The impact of the proposed rule in its current form is not expected to be material to Citi.
Tangible Common Equity, Book Value Per Share, Tangible Book Value Per Share and Return on Equity
Tangible common equity (TCE), as defined by Citi, represents common stockholders’ equity less goodwill and identifiable intangible assets (other than mortgage servicing rights (MSRs)). Return on tangible common equity (RoTCE) represents annualized net income available to common shareholders as a percentage of average TCE. Tangible book value per share (TBVPS) represents average TCE divided by average common shares outstanding. Other companies may calculate these measures differently. TCE, RoTCE and TBVPS are non-GAAP financial measures.
| In millions of dollars or shares, except per share amounts | September 30,<br>2023 | December 31,<br>2022 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Total Citigroup stockholders’ equity | $ | 209,503 | $ | 201,189 | ||||||||
| Less: Preferred stock | 19,495 | 18,995 | ||||||||||
| Common stockholders’ equity | $ | 190,008 | $ | 182,194 | ||||||||
| Less: | ||||||||||||
| Goodwill | 19,829 | 19,691 | ||||||||||
| Identifiable intangible assets (other than MSRs) | 3,811 | 3,763 | ||||||||||
| Goodwill and identifiable intangible assets (other than MSRs) related to<br><br>assets held-for-sale (HFS) | 49 | 589 | ||||||||||
| Tangible common equity (TCE) | $ | 166,319 | $ | 158,151 | ||||||||
| Common shares outstanding (CSO) | 1,913.9 | 1,937.0 | ||||||||||
| Book value per share (common stockholders’ equity/CSO) | $ | 99.28 | $ | 94.06 | ||||||||
| Tangible book value per share (TCE/CSO) | 86.90 | 81.65 | ||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| In millions of dollars | 2023 | 2022 | 2023 | 2022 | ||||||||
| Net income available to common shareholders | $ | 3,213 | $ | 3,202 | $ | 10,169 | $ | 11,538 | ||||
| Average common stockholders’ equity | 189,158 | 179,699 | 187,160 | 179,950 | ||||||||
| Average TCE | 165,327 | 155,511 | 163,188 | 155,391 | ||||||||
| Return on average common stockholders’ equity | 6.7 | % | 7.1 | % | 7.3 | % | 8.6 | % | ||||
| RoTCE | 7.7 | 8.2 | 8.3 | 9.9 |
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Managing Global Risk Table of Contents
| MANAGING GLOBAL RISK | 38 |
|---|---|
| CREDIT RISK(1) | 38 |
| Loans | 38 |
| Corporate Credit | 39 |
| Consumer Credit | 44 |
| Additional Consumer and Corporate Credit Details | 50 |
| Loans Outstanding | 50 |
| Details of Credit Loss Experience | 51 |
| Allowance for Credit Losses on Loans (ACLL) | 52 |
| Non-Accrual Loans and Assets | 54 |
| LIQUIDITY RISK | 56 |
| High-Quality Liquid Assets (HQLA) | 56 |
| Liquidity Coverage Ratio (LCR) | 56 |
| Deposits | 57 |
| Long-Term Debt | 58 |
| Secured Funding Transactions and Short-Term Borrowings | 60 |
| Credit Ratings | 61 |
| MARKET RISK(1) | 62 |
| Market Risk of Non-Trading Portfolios | 62 |
| Market Risk of Trading Portfolios | 72 |
| OTHER RISKS | 73 |
| Country Risk | 74 |
| Russia | 75 |
| Ukraine | 77 |
| Argentina | 78 |
(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.
MANAGING GLOBAL RISK
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 and the key Leadership Principles that support it, as well as Citi’s risk appetite. For more information on managing global risk at Citi, see “Managing Global Risk” in Citi’s 2022 Form 10-K.
CREDIT RISK
For more information on credit risk, including Citi’s credit risk management, measurement and stress testing, and Citi’s consumer and corporate credit portfolios, see “Credit Risk” and “Risk Factors” in Citi’s 2022 Form 10-K.
Loans
The table below details the average loans, by business and/or segment, and the total Citigroup end-of-period loans for each of the periods indicated:
| In billions of dollars | 3Q23 | 2Q23 | 3Q22 | |||
|---|---|---|---|---|---|---|
| Personal Banking and Wealth Management | ||||||
| U.S. Retail banking | $ | 43 | $ | 40 | $ | 36 |
| U.S. Cards | 153 | 149 | 138 | |||
| Global Wealth | 151 | 150 | 151 | |||
| Total | $ | 347 | $ | 339 | $ | 325 |
| Institutional Clients Group | ||||||
| Services | $ | 83 | $ | 80 | $ | 82 |
| Banking | 181 | 185 | 197 | |||
| Markets | 14 | 13 | 12 | |||
| Total | $ | 278 | $ | 278 | $ | 291 |
| Total Legacy Franchises(1) | $ | 37 | $ | 37 | $ | 39 |
| Total Citigroup loans (AVG) | $ | 662 | $ | 654 | $ | 655 |
| Total Citigroup loans (EOP) | $ | 666 | $ | 661 | $ | 646 |
(1)See footnote 2 to the table in “Credit Risk—Consumer Credit—Consumer Credit Portfolio” below.
On an average basis, loans increased 1% both year-over-year and sequentially as growth in PBWM was largely offset by a decline in ICG and Legacy Franchises. PBWM average loans increased 7% year-over-year, primarily driven by loan growth in cards, mortgages and installment lending. ICG average loans decreased 4% year-over-year, reflecting actions taken to reduce RWA. Legacy Franchises average loans decreased 5%, primarily reflecting the impact of the continued wind-downs, particularly in Korea and China, partially offset by higher lending volumes in Mexico Consumer.
End-of-period loans increased 3% year-over-year, as growth in PBWM, reflecting an increase in U.S. Personal Banking, was partially offset by declines in ICG and Legacy Franchises. End-of-period loans increased 1% sequentially.
CORPORATE CREDIT
The following table details Citi’s corporate credit portfolio within ICG and the Mexico SBMM component of Legacy Franchises (excluding certain loans managed on a delinquency basis, loans carried at fair value and loans held-for-sale), and before consideration of collateral or hedges, by remaining tenor for the periods indicated:
| September 30, 2023 | June 30, 2023 | December 31, 2022 | ||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| In billions of dollars | Due<br>within<br>1 year | Greater<br>than 1 year<br>but within<br>5 years | Greater<br>than<br>5 years | Total<br>exposure | Due<br>within<br>1 year | Greater<br>than 1 year<br>but within<br>5 years | Greater<br>than<br>5 years | Total<br>exposure | Due<br>within<br>1 year | Greater<br>than 1 year<br>but within<br>5 years | Greater<br>than<br>5 years | Total<br>exposure | ||||||||||||
| Direct outstandings (on-balance sheet)(1) | $ | 125 | $ | 118 | $ | 38 | $ | 281 | $ | 127 | $ | 118 | $ | 35 | $ | 280 | $ | 135 | $ | 122 | $ | 27 | $ | 284 |
| Unfunded lending commitments (off-balance sheet)(2) | 144 | 259 | 19 | 422 | 135 | 260 | 16 | 411 | 140 | 256 | 10 | 406 | ||||||||||||
| Total exposure | $ | 269 | $ | 377 | $ | 57 | $ | 703 | $ | 262 | $ | 378 | $ | 51 | $ | 691 | $ | 275 | $ | 378 | $ | 37 | $ | 690 |
(1) Includes drawn loans, overdrafts, bankers’ acceptances and leases.
(2) Includes unused commitments to lend, letters of credit and financial guarantees.
Portfolio Mix—Geography and Counterparty
Citi’s corporate credit portfolio is diverse across geography and counterparty. The following table presents the percentage of this portfolio by region based on Citi’s internal management geography:
| September 30,<br>2023 | June 30, 2023 | December 31,<br>2022 | ||||
|---|---|---|---|---|---|---|
| North America | 56 | % | 56 | % | 56 | % |
| EMEA | 25 | 25 | 25 | |||
| Asia | 12 | 12 | 12 | |||
| Latin America | 7 | 7 | 7 | |||
| Total | 100 | % | 100 | % | 100 | % |
The maintenance of accurate and consistent risk ratings across the corporate credit portfolio facilitates the comparison of credit exposure across all lines of business, geographic regions and products. Counterparty risk ratings reflect an estimated probability of default for a counterparty, and internal risk ratings are derived by leveraging validated statistical models and scorecards in combination with consideration of factors specific to the obligor or market, such as management experience, competitive position, regulatory environment and commodity prices. Facility risk ratings are assigned that reflect the probability of default of the obligor and factors that affect the loss given default of the facility, such as support or collateral. Internal obligor ratings that generally correspond to BBB and above are considered investment grade, while those below are considered non-investment grade.
The following table presents the corporate credit portfolio by facility risk rating as a percentage of the total corporate credit portfolio:
| Total exposure | ||||||
|---|---|---|---|---|---|---|
| September 30,<br>2023 | June 30,<br>2023 | December 31,<br>2022 | ||||
| AAA/AA/A | 49 | % | 49 | % | 50 | % |
| BBB | 34 | 34 | 34 | |||
| BB/B | 15 | 15 | 14 | |||
| CCC or below | 2 | 2 | 2 | |||
| Total | 100 | % | 100 | % | 100 | % |
Note: Total exposure includes direct outstandings and unfunded lending commitments.
In addition to the obligor and facility risk ratings assigned to all exposures, Citi may classify exposures in the corporate credit portfolio. These classifications are consistent with Citi’s interpretation of the U.S. banking regulators’ definition of criticized exposures, which may categorize exposures as special mention, substandard, doubtful or loss.
Risk ratings and classifications are reviewed regularly and adjusted as appropriate. The credit review process incorporates quantitative and qualitative factors, including financial and non-financial disclosures or metrics, idiosyncratic events or changes to the competitive, regulatory or macroeconomic environment.
Citi believes the corporate credit portfolio to be appropriately rated and classified as of September 30, 2023. Citi has taken action to adjust internal ratings and classifications of exposures as both the macroeconomic environment and obligor-specific factors have changed, particularly where additional stress has been seen.
As obligor risk ratings are downgraded, the probability of default increases. Downgrades of obligor risk ratings tend to result in a higher provision for credit losses. In addition, appetite per obligor is reduced consistent with the ratings, and downgrades may result in the purchase of additional credit derivatives or other risk/structural mitigants to hedge the incremental credit risk, or may result in Citi’s seeking to reduce exposure to an obligor or an industry sector. Citi will continue to review exposures to ensure that the appropriate probability of default is incorporated into all risk assessments.
See Note 13 for additional information on Citi’s corporate credit portfolio.
Portfolio Mix—Industry
Citi’s corporate credit portfolio is diversified by industry. The following table details the allocation of Citi’s total corporate credit portfolio by industry:
| Total exposure | ||||||
|---|---|---|---|---|---|---|
| September 30,<br>2023 | June 30,<br>2023 | December 31,<br>2022 | ||||
| Transportation and industrials | 21 | % | 21 | % | 20 | % |
| Technology, media and telecom | 12 | 12 | 12 | |||
| Consumer retail | 12 | 12 | 11 | |||
| Real estate | 10 | 10 | 10 | |||
| Commercial | 8 | 8 | 8 | |||
| Residential | 2 | 2 | 2 | |||
| Banks and finance companies(1) | 10 | 10 | 10 | |||
| Power, chemicals, metals and mining | 9 | 9 | 9 | |||
| Energy and commodities | 7 | 7 | 7 | |||
| Health | 5 | 6 | 6 | |||
| Insurance | 4 | 4 | 4 | |||
| Asset managers and funds | 3 | 3 | 5 | |||
| Public sector | 3 | 3 | 3 | |||
| Financial markets infrastructure | 3 | 2 | 2 | |||
| Other industries | 1 | 1 | 1 | |||
| Total | 100 | % | 100 | % | 100 | % |
(1) As of the periods in the table, Citi had less than 1% exposure to securities firms. See corporate credit portfolio by industry, below.
The following table details Citi’s corporate credit portfolio by industry as of September 30, 2023:
| Non-investment grade | Selected metrics | |||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| In millions of dollars | Total credit exposure | Funded(1) | Unfunded(1) | Investment grade | Non-criticized | Criticized performing | Criticized non-performing(2) | 30 days or more past due and accruing | Net credit losses (recoveries) | Credit derivative hedges(3) | ||||||||||
| Transportation and industrials | $ | 150,025 | $ | 58,312 | $ | 91,713 | $ | 119,760 | $ | 24,845 | $ | 5,145 | $ | 275 | $ | 136 | $ | 37 | $ | (7,047) |
| Autos(4) | 49,486 | 22,606 | 26,880 | 42,945 | 5,439 | 1,044 | 58 | 43 | 19 | (2,291) | ||||||||||
| Transportation | 27,565 | 11,181 | 16,384 | 20,314 | 5,758 | 1,408 | 85 | 7 | 7 | (1,185) | ||||||||||
| Industrials | 72,974 | 24,525 | 48,449 | 56,501 | 13,648 | 2,693 | 132 | 86 | 11 | (3,571) | ||||||||||
| Technology, media and telecom | 84,142 | 28,116 | 56,026 | 66,735 | 13,586 | 3,383 | 438 | 107 | 21 | (5,449) | ||||||||||
| Consumer retail | 81,615 | 34,117 | 47,498 | 63,016 | 15,030 | 3,370 | 199 | 154 | 53 | (5,371) | ||||||||||
| Real estate | 70,625 | 49,107 | 21,518 | 62,050 | 4,467 | 3,287 | 821 | 103 | 2 | (547) | ||||||||||
| Commercial | 54,478 | 34,950 | 19,528 | 45,972 | 4,461 | 3,287 | 758 | 103 | 2 | (547) | ||||||||||
| Residential | 16,147 | 14,157 | 1,990 | 16,078 | 6 | — | 63 | — | — | — | ||||||||||
| Banks and finance companies | 73,721 | 45,506 | 28,215 | 64,801 | 7,640 | 1,144 | 136 | 127 | 37 | (633) | ||||||||||
| Power, chemicals, metals and mining | 58,757 | 18,736 | 40,021 | 45,983 | 10,601 | 2,042 | 131 | 145 | 7 | (4,970) | ||||||||||
| Power | 23,430 | 4,487 | 18,943 | 20,075 | 2,726 | 535 | 94 | 16 | 7 | (2,301) | ||||||||||
| Chemicals | 21,808 | 8,044 | 13,764 | 15,855 | 4,927 | 1,011 | 15 | 50 | 1 | (2,042) | ||||||||||
| Metals and mining | 13,519 | 6,205 | 7,314 | 10,053 | 2,948 | 496 | 22 | 79 | (1) | (627) | ||||||||||
| Energy and commodities(5) | 45,098 | 12,752 | 32,346 | 38,870 | 5,607 | 481 | 140 | 3 | (14) | (3,079) | ||||||||||
| Health | 34,731 | 9,029 | 25,702 | 29,239 | 4,087 | 1,249 | 156 | 24 | 7 | (3,021) | ||||||||||
| Insurance | 29,685 | 3,550 | 26,135 | 28,608 | 1,041 | 36 | — | 6 | — | (4,436) | ||||||||||
| Asset managers and funds | 22,027 | 5,559 | 16,468 | 20,389 | 1,535 | 64 | 39 | 1 | — | (170) | ||||||||||
| Public sector | 23,530 | 10,730 | 12,800 | 20,975 | 2,089 | 462 | 4 | 40 | 6 | (1,281) | ||||||||||
| Financial markets infrastructure | 18,884 | 123 | 18,761 | 18,884 | — | — | — | — | — | (7) | ||||||||||
| Securities firms | 1,620 | 623 | 997 | 951 | 635 | 34 | — | — | — | (2) | ||||||||||
| Other industries(6) | 9,000 | 5,184 | 3,816 | 4,203 | 4,492 | 270 | 35 | 48 | (1) | (12) | ||||||||||
| Total | $ | 703,460 | $ | 281,445 | $ | 422,016 | $ | 584,464 | $ | 95,655 | $ | 20,967 | $ | 2,374 | $ | 894 | $ | 155 | $ | (36,025) |
(1) Funded excludes loans carried at fair value of $7.2 billion at September 30, 2023.
(2) Includes non-accrual loan exposures and criticized unfunded exposures.
(3) Represents the amount of purchased credit protection in the form of derivatives to economically hedge funded and unfunded exposures. Of the $36.0 billion of purchased credit protection, $33.7 billion represents the total notional amount of purchased credit derivatives on individual reference entities. The remaining $2.3 billion represents the first loss tranche of portfolios of purchased credit derivatives with a total notional of $18.6 billion, where the protection seller absorbs the first loss on the referenced loan portfolios.
(4) Autos total credit exposure includes securitization financing facilities secured by auto loans and leases, extended mainly to the finance company subsidiaries of global auto manufacturers, bank subsidiaries and independent auto finance companies, of approximately $18.3 billion ($10.8 billion in funded, with 100% rated investment grade) as of September 30, 2023.
(5) In addition to this exposure, Citi has energy-related exposure within the public sector (e.g., energy-related state-owned entities) and the transportation and industrials sector (e.g., off-shore drilling entities) included in the table above. As of September 30, 2023, Citi’s total exposure to these energy-related entities was approximately $5.0 billion, of which approximately $2.6 billion consisted of direct outstanding funded loans.
(6) Includes $0.8 billion and $0.1 billion of funded and unfunded exposure at September 30, 2023, respectively, primarily related to commercial credit card delinquency-managed loans.
Exposure to Commercial Real Estate
As of September 30, 2023, Citi’s total credit exposure to commercial real estate (CRE) was $66 billion (unchanged from June 30, 2023), including $8 billion of exposure related to office buildings. This total CRE exposure consisted of (i) approximately $54 billion related to corporate clients (unchanged from June 30, 2023), mainly included in the real estate category in the table above, and (ii) approximately $11 billion related to Private bank clients (unchanged from June 30, 2023) within PBWM that is not in the table above as they are not considered corporate exposures.
In addition, as of September 30, 2023, approximately 86% of Citi’s total CRE exposure was rated investment grade and more than 76% was to borrowers in the U.S.
As of September 30, 2023, the ACLL attributed to the total funded CRE exposure (including the Private bank) was approximately 1.45%, and there were $743 million of non-accrual CRE loans.
The following table details Citi’s corporate credit portfolio by industry as of December 31, 2022:
| Non-investment grade | Selected metrics | |||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| In millions of dollars | Total credit exposure | Funded(1) | Unfunded(1) | Investment grade | Non-criticized | Criticized performing | Criticized non-performing(2) | 30 days or more past due and accruing | Net credit losses (recoveries) | Credit derivative hedges(3) | ||||||||||
| Transportation and industrials | $ | 139,225 | $ | 57,271 | $ | 81,954 | $ | 109,197 | $ | 19,697 | $ | 9,850 | $ | 481 | $ | 403 | $ | — | $ | (8,459) |
| Autos(4) | 47,482 | 21,995 | 25,487 | 40,795 | 5,171 | 1,391 | 125 | 52 | — | (3,084) | ||||||||||
| Transportation | 24,843 | 10,374 | 14,469 | 18,078 | 3,156 | 3,444 | 165 | 57 | (30) | (1,270) | ||||||||||
| Industrials | 66,900 | 24,902 | 41,998 | 50,324 | 11,370 | 5,015 | 191 | 294 | 30 | (4,105) | ||||||||||
| Technology, media and telecom | 81,211 | 28,931 | 52,280 | 65,386 | 12,308 | 3,308 | 209 | 169 | 11 | (6,050) | ||||||||||
| Consumer retail | 78,255 | 32,687 | 45,568 | 60,215 | 14,830 | 2,910 | 300 | 195 | 28 | (5,395) | ||||||||||
| Real estate | 70,676 | 48,539 | 22,137 | 63,023 | 4,722 | 2,881 | 50 | 138 | 2 | (739) | ||||||||||
| Commercial | 54,139 | 34,112 | 20,027 | 46,670 | 4,716 | 2,703 | 50 | 96 | 2 | (739) | ||||||||||
| Residential | 16,537 | 14,427 | 2,110 | 16,353 | 6 | 178 | — | 42 | — | — | ||||||||||
| Banks and finance companies | 65,623 | 42,276 | 23,347 | 57,368 | 5,718 | 2,387 | 150 | 266 | 65 | (1,113) | ||||||||||
| Power, chemicals, metals and mining | 59,404 | 18,326 | 41,078 | 47,395 | 10,466 | 1,437 | 106 | 226 | 34 | (5,063) | ||||||||||
| Power | 22,718 | 4,827 | 17,891 | 18,822 | 3,325 | 512 | 59 | 129 | (3) | (2,306) | ||||||||||
| Chemicals | 23,147 | 7,765 | 15,382 | 19,033 | 3,534 | 564 | 16 | 55 | 30 | (2,098) | ||||||||||
| Metals and mining | 13,539 | 5,734 | 7,805 | 9,540 | 3,607 | 361 | 31 | 42 | 7 | (659) | ||||||||||
| Energy and commodities(5) | 46,309 | 13,069 | 33,240 | 38,918 | 6,076 | 1,200 | 115 | 180 | 11 | (3,852) | ||||||||||
| Health | 41,836 | 8,771 | 33,065 | 36,954 | 3,737 | 978 | 167 | 84 | 7 | (2,855) | ||||||||||
| Insurance | 29,932 | 4,417 | 25,515 | 29,090 | 801 | 41 | — | 44 | — | (3,884) | ||||||||||
| Asset managers and funds | 35,983 | 13,162 | 22,821 | 34,431 | 1,492 | 60 | — | 95 | — | (759) | ||||||||||
| Public sector | 23,705 | 11,736 | 11,969 | 20,663 | 2,084 | 956 | 2 | 77 | 4 | (1,633) | ||||||||||
| Financial markets infrastructure | 8,742 | 60 | 8,682 | 8,672 | 70 | — | — | — | — | (18) | ||||||||||
| Securities firms | 1,462 | 569 | 893 | 625 | 678 | 157 | 2 | 2 | — | (2) | ||||||||||
| Other industries(6) | 7,374 | 4,217 | 3,157 | 4,842 | 2,245 | 238 | 49 | 19 | 16 | (8) | ||||||||||
| Total | $ | 689,737 | $ | 284,031 | $ | 405,706 | $ | 576,779 | $ | 84,924 | $ | 26,403 | $ | 1,631 | $ | 1,898 | $ | 178 | $ | (39,830) |
(1) Funded excludes loans carried at fair value of $5.1 billion at December 31, 2022.
(2) Includes non-accrual loan exposures and criticized unfunded exposures.
(3) Represents the amount of purchased credit protection in the form of derivatives to economically hedge funded and unfunded exposures. Of the $39.8 billion of purchased credit protection, $36.6 billion represents the total notional amount of purchased credit derivatives on individual reference entities. The remaining $3.2 billion represents the first loss tranche of portfolios of purchased credit derivatives with a total notional of $27.6 billion, where the protection seller absorbs the first loss on the referenced loan portfolios.
(4) Autos total credit exposure includes securitization financing facilities secured by auto loans and leases, extended mainly to the finance company subsidiaries of global auto manufacturers, bank subsidiaries and independent auto finance companies, of approximately $17.4 billion ($10.3 billion in funded, with more than 99% rated investment grade) as of December 31, 2022.
(5) In addition to this exposure, Citi has energy-related exposure within the public sector (e.g., energy-related state-owned entities) and the transportation and industrials sector (e.g., off-shore drilling entities) included in the table above. As of December 31, 2022, Citi’s total exposure to these energy-related entities was approximately $4.7 billion, of which approximately $2.4 billion consisted of direct outstanding funded loans.
(6) Includes $0.6 billion and $0.1 billion of funded and unfunded exposure at December 31, 2022, respectively, primarily related to commercial credit card delinquency-managed loans.
Credit Risk Mitigation
As part of its overall risk management activities, Citigroup uses credit derivatives, both partial- and full-term, and other risk mitigants to economically hedge portions of the credit risk in its corporate credit portfolio, in addition to outright asset sales. In advance of the expiration of partial-term economic hedges, Citi will determine, among other factors, the economic feasibility of hedging the remaining life of the instrument. The results of the mark-to-market and any realized gains or losses on credit derivatives are reflected primarily in Principal transactions in the Consolidated Statement of Income.
At September 30, 2023, June 30, 2023 and December 31, 2022, ICG had economic hedges on the corporate credit portfolio of $36.0 billion, $38.5 billion and $39.8 billion, respectively. Citi’s expected credit loss model used in the calculation of its ACL does not include the favorable impact of credit derivatives and other mitigants that are marked-to-market. In addition, the reported amounts of direct outstandings and unfunded lending commitments in the tables above do not reflect the impact of these hedging transactions. The credit protection was economically hedging underlying ICG corporate credit portfolio exposures with the following risk rating distribution:
Rating of Hedged Exposure
| September 30,<br>2023 | June 30,<br>2023 | December 31,<br>2022 | ||||
|---|---|---|---|---|---|---|
| AAA/AA/A | 45 | % | 42 | % | 39 | % |
| BBB | 43 | 43 | 45 | |||
| BB/B | 10 | 13 | 12 | |||
| CCC or below | 2 | 2 | 4 | |||
| Total | 100 | % | 100 | % | 100 | % |
CONSUMER CREDIT
Consumer Credit Portfolio
The following table presents Citi’s quarterly end-of-period consumer loans(1):
| In billions of dollars | 3Q22(2) | 4Q22(2) | 1Q23(2) | 2Q23(2) | 3Q23(2) | |||||
|---|---|---|---|---|---|---|---|---|---|---|
| Personal Banking and Wealth Management | ||||||||||
| U.S. Personal Banking | ||||||||||
| Cards | ||||||||||
| Branded cards | $ | 93.7 | $ | 100.2 | $ | 97.1 | $ | 103.0 | $ | 105.2 |
| Retail services | 46.7 | 50.5 | 48.4 | 50.0 | 50.5 | |||||
| Retail banking | ||||||||||
| Mortgages(5) | 32.3 | 33.4 | 35.3 | 37.4 | 38.8 | |||||
| Personal, small business and other | 3.5 | 3.7 | 3.9 | 4.1 | 4.3 | |||||
| Global Wealth(3)(4) | ||||||||||
| Cards | 4.0 | 4.6 | 4.4 | 4.5 | 4.6 | |||||
| Mortgages(5) | 82.0 | 84.0 | 85.2 | 87.0 | 88.8 | |||||
| Personal, small business and other(6) | 65.1 | 60.6 | 60.3 | 59.0 | 57.2 | |||||
| Total | $ | 327.3 | $ | 337.0 | $ | 334.6 | $ | 345.0 | $ | 349.4 |
| Legacy Franchises | ||||||||||
| Asia Consumer(7) | $ | 13.4 | $ | 13.3 | $ | 10.0 | $ | 9.1 | $ | 8.0 |
| Mexico Consumer (excludes Mexico SBMM) | 13.7 | 14.8 | 16.3 | 17.8 | 17.8 | |||||
| Legacy Holdings Assets(8) | 3.2 | 3.0 | 2.8 | 2.7 | 2.5 | |||||
| Total | $ | 30.3 | $ | 31.1 | $ | 29.1 | $ | 29.6 | $ | 28.3 |
| Total consumer loans | $ | 357.6 | $ | 368.1 | $ | 363.7 | $ | 374.6 | $ | 377.7 |
(1)End-of-period loans include interest and fees on credit cards.
(2)Asia Consumer loan balances, reported within Legacy Franchises, exclude any loans reclassified to held-for-sale (HFS) as of the date Citi enters into a sale agreement for the respective Asia Consumer banking business. These reclassified HFS loans are instead reported in Other assets on the Consolidated Balance Sheet until sale closing. The remaining Asia Consumer loan portfolios—China, Korea, Russia and Poland—are held-for-investment and included in end-of-period consumer loans for all periods presented. All HFS portfolios were reclassified prior to the end of 1Q22 except for a $1.8 billion portfolio, which was moved to HFS in 1Q23 and subsequently sold in 2Q23.
(3)Consists of $101.1 billion, $99.5 billion, $98.9 billion, $98.2 billion and $99.3 billion of loans in North America as of September 30, 2023, June 30, 2023, March 31, 2023, December 31, 2022 and September 30, 2022, respectively. For additional information on the credit quality of the Global Wealth portfolio, see Note 13.
(4)Consists of $49.5 billion, $51.0 billion, $51.0 billion, $51.0 billion and $51.8 billion of loans outside North America as of September 30, 2023, June 30, 2023, March 31, 2023, December 31, 2022 and September 30, 2022, respectively.
(5)See Note 13 for details on loan-to-value ratios for the portfolios and FICO scores for the U.S. portfolio.
(6)At September 30, 2023, includes approximately $47 billion of classifiably managed loans. Over 90% of these loans are fully collateralized (consisting primarily of marketable investment securities, commercial real estate and limited partner capital commitments in private equity) and have experienced very low historical net credit losses (NCLs). As discussed below, approximately 95% of the classifiably managed portion of these loans are investment grade. See “Consumer Loan Delinquencies Amounts and Ratios” below for details on the delinquency-managed portfolio.
(7)Asia Consumer also includes loans and leases in certain EMEA countries for all periods presented.
(8)Primarily consists of certain North America consumer mortgages.
For information on changes to Citi’s consumer loans, see “Credit Risk—Loans” above.
Consumer Credit Trends
Personal Banking and Wealth Management (PBWM)
| Personal Banking and Wealth Management |
|---|
As indicated above, PBWM consists of U.S. Personal Banking and Global Wealth Management (Global Wealth). U.S. Personal Banking provides card products through Branded cards and Retail services, and also provides mortgages and home equity, small business and personal consumer loans through Citi’s Retail banking network. The Retail bank is concentrated in six major U.S. metropolitan areas. Global Wealth provides investment services, cards, mortgages and personal, small business and other consumer loans through the Private bank, Wealth at Work and Citigold.
As of September 30, 2023, 45% of PBWM consumer loans consisted of U.S. cards loans. U.S. cards net credit losses represented approximately 94% of total PBWM losses.
As shown in the chart above, the third quarter of 2023 net credit loss rate in PBWM increased quarter-over-quarter and year-over-year, largely driven by a continued increase in net flow rates (due to certain loans migrating into later-stage delinquency buckets), primarily reflecting the ongoing normalization in Branded cards and Retail services, including macroeconomic pressures related to the higher inflationary and interest rate environment.
PBWM’s 90+ days past due delinquency rate increased quarter-over-quarter and year-over-year, largely driven by a continued increase in net flow rates (due to certain loans migrating into later-stage delinquency buckets), primarily reflecting the ongoing normalization in Branded cards and Retail services, including the macroeconomic pressures related to the higher inflationary and interest rate environment.
| Branded Cards |
|---|
U.S. Personal Banking’s Branded cards portfolio includes proprietary and co-branded cards.
As shown in the chart above, the third quarter of 2023 net credit loss rate and 90+ days past due delinquency rate in Branded cards increased quarter-over-quarter and year-over-year, largely driven by a continued increase in net flow rates (due to certain loans migrating into later-stage delinquency buckets), primarily reflecting ongoing normalization, including macroeconomic pressures related to the higher inflationary and interest rate environment.
| Retail Services |
|---|
U.S. Personal Banking’s Retail services partners directly with more than 20 retailers and dealers to offer private label and co-branded cards. Retail services’ target market focuses on select industry segments such as home improvement, specialty retail, consumer electronics and fuel. Retail services continually evaluates opportunities to add partners within target industries that have strong loyalty, lending or payment programs and growth potential.
As shown in the chart above, the third quarter of 2023 net credit loss rate and 90+ days past due delinquency rate in Retail services increased quarter-over-quarter and year-over-year, largely driven by a continued increase in net flow rates (due to certain loans migrating into later-stage delinquency buckets), primarily reflecting the ongoing normalization, including macroeconomic pressures related to the higher inflationary and interest rate environment.
For additional information on cost of credit, loan delinquency and other information for Citi’s cards portfolios, see each respective business’s results of operations above and Note 13.
| Retail Banking |
|---|
U.S. Personal Banking’s Retail banking portfolio consists primarily of consumer mortgages (including home equity) and unsecured lending products, such as small business loans and personal loans. The portfolio is generally delinquency managed, where Citi evaluates credit risk based on FICO scores, delinquencies and the value of underlying collateral. The consumer mortgages in this portfolio have historically been extended to high credit quality customers, generally with loan-to-value ratios that are less than or equal to 80% on first and second mortgages. For additional information, see “Loan-to-Value (LTV) Ratios” in Note 13.
As shown in the chart above, the net credit loss rate in Retail banking for the third quarter of 2023 was unchanged quarter-over-quarter, and increased year-over-year, primarily driven by growth and seasoning of the personal loans portfolio.
The 90+ days past due delinquency rate was broadly stable quarter-over-quarter, and decreased year-over-year, primarily driven by lower delinquencies in U.S. mortgages.
| Global Wealth |
|---|
As discussed above, the Global Wealth credit portfolios primarily consist of consumer mortgages, cards and other lending products extended to customer segments that range from the affluent to ultra-high-net-worth through the Private bank, Wealth at Work and Citigold. These customer segments represent a target market that is characterized by historically low default rates and delinquencies.
As of September 30, 2023, approximately $47 billion, or 31%, of the portfolio was classifiably managed and primarily consisted of margin lending, commercial real estate, subscription credit finance and other lending programs. These classifiably managed loans are primarily evaluated for credit risk based on their internal risk rating, of which 95% is rated investment grade. While the delinquency rate in the chart above is calculated only for the delinquency-managed
portfolio, the net credit loss rate is calculated using net credit losses for both the delinquency and classifiably managed portfolios. For more information on Citi’s total commercial real estate exposure, see “Exposure to Commercial Real Estate” within the Corporate Credit section.
As shown in the chart above, the net credit loss and 90+ days past due delinquency rates in Global Wealth for the third quarter of 2023 were broadly stable quarter-over-quarter and year-over-year. The low levels of net credit losses and the 90+ days past due delinquency rate continued to reflect the strong credit profiles of the Global Wealth portfolios.
Legacy Franchises
| Asia Consumer |
|---|
Asia Consumer provides credit cards, consumer mortgages and small business and personal loans. Asia Consumer also includes loans and leases in certain EMEA countries for all periods presented. As discussed above, as of the third quarter of 2023, Asia Consumer includes only the loan balances of the remaining consumer banking portfolios held-for-investment (China, Korea, Russia and Poland).
As shown in the chart above, the net credit loss rate in Asia Consumer for the third quarter of 2023 decreased quarter-over-quarter, driven by higher recoveries, and increased year-over-year, primarily driven by lower average loans due to the ongoing wind-downs of the remaining consumer businesses, particularly Korea, and the reclassification of the portfolio to HFS in the first quarter of 2023 (subsequently sold in the second quarter of 2023).
The 90+ days past due delinquency rate was broadly stable quarter-over-quarter and increased year-over-year. The year-over-year increase was mainly driven by lower loans due to the ongoing wind-downs.
| Mexico Consumer |
|---|
Mexico Consumer operates in Mexico through Citibanamex and provides cards, consumer mortgages and small business and personal loans. Mexico Consumer serves a more mass-market segment in Mexico and focuses on developing multiproduct relationships with customers.
As shown in the chart above, the net credit loss rate in Mexico Consumer for the third quarter of 2023 increased quarter-over-quarter and year-over-year, primarily driven by the ongoing normalization of loss rates after peak losses experienced during the pandemic.
The 90+ days past due delinquency rate decreased quarter-over-quarter, driven by the sale of delinquent loans of a portfolio segment, and increased year-over-year, driven by the ongoing normalization of delinquency rates after peak delinquencies experienced during the pandemic.
For additional information on cost of credit, loan delinquency and other information for Citi’s consumer loan portfolios, see each respective business’s results of operations above and Note 13.
U.S. Cards FICO Distribution
The following tables present the current FICO score distributions for Citi’s Branded cards and Retail services portfolios based on end-of-period receivables. FICO scores are updated monthly for substantially all of the portfolio and on a quarterly basis for the remaining portfolio.
Branded Cards
| FICO distribution(1) | September 30, 2023 | June 30, 2023 | September 30, 2022 | |||
|---|---|---|---|---|---|---|
| > 760 | 46 | % | 47 | % | 48 | % |
| 680–760 | 39 | 38 | 38 | |||
| < 680 | 15 | 15 | 14 | |||
| Total | 100 | % | 100 | % | 100 | % |
Retail Services
| FICO distribution(1) | September 30, 2023 | June 30, 2023 | September 30, 2022 | |||
|---|---|---|---|---|---|---|
| > 760 | 26 | % | 27 | % | 27 | % |
| 680–760 | 42 | 42 | 43 | |||
| < 680 | 32 | 31 | 30 | |||
| Total | 100 | % | 100 | % | 100 | % |
(1) The FICO bands in the tables are consistent with general industry peer presentations.
The FICO distribution of both card portfolios declined slightly from the prior quarter and the prior year, reflecting the ongoing normalization in net credit loss and delinquency rates. The FICO distribution continued to reflect strong underlying credit quality and benefits from the continued impacts of prior government stimulus, unemployment benefits and customer relief programs. See Note 13 for additional information on FICO scores.
Additional Consumer Credit Details
Consumer Loan Delinquencies Amounts and Ratios
| EOP<br><br>loans(1) | 90+ days past due(2) | 30–89 days past due(2) | ||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| In millions of dollars,<br>except EOP loan amounts in billions | September 30,<br>2023 | September 30,<br>2023 | June 30,<br>2023 | September 30,<br>2022 | September 30,<br>2023 | June 30,<br>2023 | September 30,<br>2022 | |||||||||||||
| Personal Banking and Wealth Management(3)(4)(5) | ||||||||||||||||||||
| Total | $ | 349.4 | $ | 2,399 | $ | 2,041 | $ | 1,557 | $ | 2,585 | $ | 2,213 | $ | 1,778 | ||||||
| Ratio | 0.79 | % | 0.69 | % | 0.57 | % | 0.86 | % | 0.75 | % | 0.65 | % | ||||||||
| U.S. Personal Banking | ||||||||||||||||||||
| Total | $ | 198.8 | $ | 2,207 | $ | 1,882 | $ | 1,286 | $ | 2,327 | $ | 1,974 | $ | 1,474 | ||||||
| Ratio | 1.11 | % | 0.97 | % | 0.73 | % | 1.17 | % | 1.02 | % | 0.84 | % | ||||||||
| Cards(4) | ||||||||||||||||||||
| Total | 155.7 | 2,045 | 1,723 | 1,105 | 2,093 | 1,741 | 1,269 | |||||||||||||
| Ratio | 1.31 | % | 1.13 | % | 0.79 | % | 1.34 | % | 1.14 | % | 0.90 | % | ||||||||
| Branded cards | 105.2 | 972 | 837 | 474 | 1,019 | 834 | 554 | |||||||||||||
| Ratio | 0.92 | % | 0.81 | % | 0.51 | % | 0.97 | % | 0.81 | % | 0.59 | % | ||||||||
| Retail services | 50.5 | 1,073 | 886 | 631 | 1,074 | 907 | 715 | |||||||||||||
| Ratio | 2.12 | % | 1.77 | % | 1.35 | % | 2.13 | % | 1.81 | % | 1.53 | % | ||||||||
| Retail banking(3) | 43.1 | 162 | 159 | 181 | 234 | 233 | 205 | |||||||||||||
| Ratio | 0.38 | % | 0.39 | % | 0.51 | % | 0.55 | % | 0.57 | % | 0.58 | % | ||||||||
| Global Wealth<br><br>delinquency-managed loans(5) | $ | 103.8 | $ | 192 | $ | 159 | $ | 271 | $ | 258 | $ | 239 | $ | 304 | ||||||
| Ratio | 0.18 | % | 0.16 | % | 0.28 | % | 0.25 | % | 0.23 | % | 0.31 | % | ||||||||
| Global Wealth<br><br>classifiably managed loans(6) | $ | 46.8 | N/A | N/A | N/A | N/A | N/A | N/A | ||||||||||||
| Legacy Franchises | ||||||||||||||||||||
| Total | $ | 28.3 | $ | 393 | $ | 413 | $ | 375 | $ | 366 | $ | 359 | $ | 299 | ||||||
| Ratio | 1.40 | % | 1.40 | % | 1.25 | % | 1.30 | % | 1.22 | % | 1.00 | % | ||||||||
| Asia Consumer(7)(8) | 8.0 | 49 | 50 | 47 | 58 | 60 | 63 | |||||||||||||
| Ratio | 0.61 | % | 0.55 | % | 0.35 | % | 0.73 | % | 0.66 | % | 0.47 | % | ||||||||
| Mexico Consumer | 17.8 | 235 | 243 | 173 | 236 | 228 | 169 | |||||||||||||
| Ratio | 1.32 | % | 1.37 | % | 1.26 | % | 1.33 | % | 1.28 | % | 1.23 | % | ||||||||
| Legacy Holdings Assets (consumer)(9) | 2.5 | 109 | 120 | 155 | 72 | 71 | 67 | |||||||||||||
| Ratio | 4.74 | % | 4.80 | % | 5.34 | % | 3.13 | % | 2.84 | % | 2.31 | % | ||||||||
| Total Citigroup consumer | $ | 377.7 | $ | 2,792 | $ | 2,454 | $ | 1,932 | $ | 2,951 | $ | 2,572 | $ | 2,077 | ||||||
| Ratio | 0.85 | % | 0.75 | % | 0.64 | % | 0.89 | % | 0.79 | % | 0.68 | % |
(1)End-of-period (EOP) loans include interest and fees on credit cards.
(2)The ratios of 90+ days past due and 30–89 days past due are calculated based on EOP loans, net of unearned income.
(3)The 90+ days past due and 30–89 days past due and related ratios for Retail banking exclude loans guaranteed by U.S. government-sponsored agencies since the potential risk of loss predominantly resides with the U.S. government-sponsored agencies. The amounts excluded for loans 90+ days past due and (EOP loans) were $61 million ($0.5 billion), $73 million ($0.5 billion) and $96 million ($0.6 billion) at September 30, 2023, June 30, 2023 and September 30, 2022, respectively. The amounts excluded for loans 30–89 days past due (the 30–89 days past due EOP loans have the same adjustments as the 90+ days past due EOP loans) were $70 million, $68 million and $67 million at September 30, 2023, June 30, 2023 and September 30, 2022, respectively. The EOP loans in the table include the guaranteed loans.
(4)The 90+ days past due balances for Branded cards and Retail services are generally still accruing interest. Citi’s policy is generally to accrue interest on credit card loans until 180 days past due, unless notification of bankruptcy filing has been received earlier.
(5)Excludes EOP classifiably managed Private bank loans. These loans are not included in the delinquency numerator, denominator and ratios.
(6)These loans are evaluated for non-accrual status and write-off primarily based on their internal risk classification and not solely on their delinquency status, and therefore delinquency metrics are excluded from this table. As of September 30, 2023, June 30, 2023 and September 30, 2022, 95%, 97% and 95% of Global Wealth classifiably managed loans were rated investment grade. For additional information on the credit quality of the Global Wealth portfolio, including classifiably managed portfolios, see “Consumer Credit Trends” above.
(7)Asia Consumer includes delinquencies and loans in certain EMEA countries for all periods presented.
(8)Citi has entered into agreements to sell certain Asia Consumer banking businesses. Accordingly, the loans of these businesses have been reclassified as HFS in Other assets on the Consolidated Balance Sheet, and hence the loans and related delinquencies and ratios are not included in this table. The reclassifications commenced as follows: Bahrain, India, Indonesia, Malaysia, Taiwan, Thailand and Vietnam in 1Q22 (Bahrain, Malaysia and Thailand closed in 4Q22; India and Vietnam closed in 1Q23 and Taiwan closed in 3Q23). In addition, a portfolio was reclassified to HFS in the first quarter of 2023 and subsequently sold in the second quarter of 2023. See Note 2 for additional information.
(9)The 90+ days past due and 30–89 days past due and related ratios exclude U.S. mortgage loans that are primarily related to U.S. mortgages guaranteed by U.S. government-sponsored agencies since the potential risk of loss predominantly resides with the U.S. agencies. The amounts excluded for 90+ days past due and (EOP loans) were $67 million ($0.2 billion), $77 million ($0.2 billion) and $95 million ($0.3 billion) at September 30, 2023, June 30, 2023 and September 30, 2022, respectively. The amounts excluded for loans 30–89 days past due (the 30–89 days past due EOP loans have the same adjustments as the 90+ days past due EOP loans) were $36 million, $31 million and $31 million at September 30, 2023, June 30, 2023 and September 30, 2022, respectively. The EOP loans in the table include the guaranteed loans.
N/A Not applicable
Consumer Loan Net Credit Losses (NCLs) and Ratios
| Average<br><br>loans(1) | Net credit losses(2) | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| In millions of dollars, except average loan amounts in billions | 3Q23 | 3Q23 | 2Q23 | 3Q22 | |||||||
| Personal Banking and Wealth Management(2) | |||||||||||
| Total | $ | 346.5 | $ | 1,367 | $ | 1,241 | $ | 723 | |||
| Ratio | 1.57 | % | 1.47 | % | 0.88 | % | |||||
| U.S. Personal Banking | |||||||||||
| Total | $ | 195.6 | $ | 1,343 | $ | 1,218 | $ | 706 | |||
| Ratio | 2.72 | % | 2.58 | % | 1.61 | % | |||||
| Cards | |||||||||||
| Total | 153.4 | 1,280 | 1,159 | 663 | |||||||
| Ratio | 3.31 | % | 3.12 | % | 1.91 | % | |||||
| Branded cards | 103.2 | 707 | 614 | 348 | |||||||
| Ratio | 2.72 | % | 2.47 | % | 1.50 | % | |||||
| Retail services | 50.2 | 573 | 545 | 315 | |||||||
| Ratio | 4.53 | % | 4.46 | % | 2.71 | % | |||||
| Retail banking | 42.2 | 63 | 59 | 43 | |||||||
| Ratio | 0.59 | % | 0.59 | % | 0.47 | % | |||||
| Global Wealth | $ | 150.9 | $ | 24 | $ | 23 | $ | 17 | |||
| Ratio | 0.06 | % | 0.06 | % | 0.04 | % | |||||
| Legacy Franchises | |||||||||||
| Total | $ | 29.1 | $ | 212 | $ | 188 | $ | 158 | |||
| Ratio | 2.89 | % | 2.59 | % | 1.97 | % | |||||
| Asia Consumer(3)(4) | 8.6 | 31 | 41 | 39 | |||||||
| Ratio | 1.43 | % | 1.73 | % | 1.02 | % | |||||
| Mexico Consumer | 17.9 | 186 | 153 | 130 | |||||||
| Ratio | 4.12 | % | 3.65 | % | 3.82 | % | |||||
| Legacy Holdings Assets (consumer) | 2.6 | (5) | (6) | (11) | |||||||
| Ratio | (0.76) | % | (0.86) | % | (1.41) | % | |||||
| Total Citigroup | $ | 375.6 | $ | 1,579 | $ | 1,429 | $ | 881 | |||
| Ratio | 1.67 | % | 1.56 | % | 0.98 | % |
(1)Average loans include interest and fees on credit cards.
(2)The ratios of net credit losses are calculated based on average loans, net of unearned income.
(3)Asia Consumer includes NCLs and average loans in certain EMEA countries (Russia and Poland) for all periods presented.
(4)Approximately $4 million, $8 million and $34 million in NCLs relating to certain Asia Consumer businesses classified as held-for-sale in Other assets and Other liabilities on the Consolidated Balance Sheet were recorded as a reduction in revenue (Other revenue) in 3Q23, 2Q23 and 3Q22, respectively. Accordingly, these NCLs are not included in this table. See Note 2 for additional information regarding businesses held-for-sale.
ADDITIONAL CONSUMER AND CORPORATE CREDIT DETAILS
Loans Outstanding
| 3rd Qtr. | 2nd Qtr. | 1st Qtr. | 4th Qtr. | 3rd Qtr. | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| In millions of dollars | 2023 | 2023 | 2023 | 2022 | 2022 | ||||||||||
| Consumer loans | |||||||||||||||
| In North America offices(1) | |||||||||||||||
| Residential first mortgages(2) | $ | 106,369 | $ | 102,680 | $ | 98,790 | $ | 96,039 | $ | 93,381 | |||||
| Home equity loans(2) | 3,796 | 4,000 | 4,244 | 4,580 | 4,794 | ||||||||||
| Credit cards | 155,698 | 152,951 | 145,543 | 150,643 | 140,404 | ||||||||||
| Personal, small business and other | 36,590 | 37,161 | 37,812 | 37,752 | 40,110 | ||||||||||
| Total | $ | 302,453 | $ | 296,792 | $ | 286,389 | $ | 289,014 | $ | 278,689 | |||||
| In offices outside North America(1) | |||||||||||||||
| Residential mortgages(2) | $ | 26,389 | $ | 27,090 | $ | 26,913 | $ | 28,114 | $ | 27,281 | |||||
| Credit cards | 13,573 | 13,714 | 13,033 | 12,955 | 11,764 | ||||||||||
| Personal, small business and other | 35,299 | 36,995 | 37,361 | 37,984 | 39,849 | ||||||||||
| Total | $ | 75,261 | $ | 77,799 | $ | 77,307 | $ | 79,053 | $ | 78,894 | |||||
| Consumer loans, net of unearned income(3) | $ | 377,714 | $ | 374,591 | $ | 363,696 | $ | 368,067 | $ | 357,583 | |||||
| Corporate loans | |||||||||||||||
| In North America offices(1) | |||||||||||||||
| Commercial and industrial | $ | 58,130 | $ | 59,790 | $ | 59,790 | $ | 56,176 | $ | 52,990 | |||||
| Financial institutions | 36,783 | 36,268 | 38,524 | 43,399 | 43,667 | ||||||||||
| Mortgage and real estate(2) | 17,445 | 17,495 | 18,562 | 17,829 | 17,762 | ||||||||||
| Installment and other | 23,207 | 22,153 | 23,578 | 23,767 | 21,222 | ||||||||||
| Lease financing | 225 | 224 | 299 | 308 | 383 | ||||||||||
| Total | $ | 135,790 | $ | 135,930 | $ | 140,753 | $ | 141,479 | $ | 136,024 | |||||
| In offices outside North America(1) | |||||||||||||||
| Commercial and industrial | $ | 95,528 | $ | 95,836 | $ | 92,803 | $ | 93,967 | $ | 100,570 | |||||
| Financial institutions | 23,759 | 21,701 | 22,272 | 21,931 | 23,604 | ||||||||||
| Mortgage and real estate(2) | 6,481 | 6,076 | 4,975 | 4,179 | 4,005 | ||||||||||
| Installment and other | 24,407 | 23,395 | 24,800 | 23,347 | 19,653 | ||||||||||
| Lease financing | 46 | 49 | 49 | 46 | 48 | ||||||||||
| Governments and official institutions | 2,794 | 3,034 | 2,647 | 4,205 | 4,473 | ||||||||||
| Total | $ | 153,015 | $ | 150,091 | $ | 147,546 | $ | 147,675 | $ | 152,353 | |||||
| Corporate loans, net of unearned income, excluding portfolio layer cumulative basis adjustments(4) | $ | 288,805 | $ | 286,021 | $ | 288,299 | $ | 289,154 | $ | 288,377 | |||||
| Unallocated portfolio layer cumulative basis adjustments | $ | (171) | $ | — | $ | — | $ | — | $ | — | |||||
| Corporate loans, net of unearned income(4) | $ | 288,634 | $ | 286,021 | $ | 288,299 | $ | 289,154 | $ | 288,377 | |||||
| Total loans—net of unearned income | $ | 666,348 | $ | 660,612 | $ | 651,995 | $ | 657,221 | $ | 645,960 | |||||
| Allowance for credit losses on loans (ACLL) | (17,629) | (17,496) | (17,169) | (16,974) | (16,309) | ||||||||||
| Total loans—net of unearned income and ACLL | $ | 648,719 | $ | 643,116 | $ | 634,826 | $ | 640,247 | $ | 629,651 | |||||
| ACLL as a percentage of total loans—<br>net of unearned income(5) | 2.68 | % | 2.67 | % | 2.65 | % | 2.60 | % | 2.54 | % | |||||
| ACLL for consumer loan losses as a percentage of <br>total consumer loans—net of unearned income(5) | 3.95 | % | 3.97 | % | 3.96 | % | 3.84 | % | 3.74 | % | |||||
| ACLL for corporate loan losses as a percentage of <br>total corporate loans—net of unearned income(5) | 0.97 | % | 0.94 | % | 0.98 | % | 1.01 | % | 1.04 | % |
(1)North America includes the U.S., Canada and Puerto Rico. Mexico is included in offices outside North America. The classification of corporate loans between offices in North America and outside North America is based on the domicile of the booking unit. The difference between the domicile of the booking unit and the domicile of the managing unit is not material.
(2)Loans secured primarily by real estate.
(3)Consumer loans are net of unearned income of $789 million, $769 million, $748 million, $712 million and $671 million at September 30, 2023, June 30, 2023, March 31, 2023, December 31, 2022 and September 30, 2022, respectively. Unearned income on consumer loans primarily represents unamortized origination fees and costs, premiums and discounts.
(4)Corporate loans include Mexico SBMM loans and are net of unearned income of $(806) million, $(795) million, $(801) million, $(797) million and $(750) million at September 30, 2023, June 30, 2023, March 31, 2023, December 31, 2022 and September 30, 2022, respectively. Unearned income on corporate loans primarily represents interest received in advance, but not yet earned, on loans originated on a discounted basis.
(5)Because loans carried at fair value do not have an ACLL, they are excluded from the ACLL ratio calculation.
Details of Credit Loss Experience
| 3rd Qtr. | 2nd Qtr. | 1st Qtr. | 4th Qtr. | 3rd Qtr. | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| In millions of dollars | 2023 | 2023 | 2023 | 2022 | 2022 | ||||||||||
| Allowance for credit losses on loans (ACLL) at beginning of period | $ | 17,496 | $ | 17,169 | $ | 16,974 | $ | 16,309 | $ | 15,952 | |||||
| Adjustment to opening balance: | |||||||||||||||
| Financial instruments—TDRs and vintage disclosures(1) | $ | — | $ | — | $ | (352) | $ | — | $ | — | |||||
| Adjusted ACLL at beginning of period | $ | 17,496 | $ | 17,169 | $ | 16,622 | $ | 16,309 | $ | 15,952 | |||||
| Provision for credit losses on loans (PCLL) | |||||||||||||||
| Consumer | $ | 1,656 | $ | 1,838 | $ | 1,800 | $ | 1,779 | $ | 1,281 | |||||
| Corporate | 160 | (77) | (63) | (6) | 47 | ||||||||||
| Total | $ | 1,816 | $ | 1,761 | $ | 1,737 | $ | 1,773 | $ | 1,328 | |||||
| Gross credit losses on loans | |||||||||||||||
| Consumer | |||||||||||||||
| In U.S. offices | $ | 1,611 | $ | 1,513 | $ | 1,329 | $ | 1,117 | $ | 946 | |||||
| In offices outside the U.S. | 317 | 280 | 266 | 220 | 248 | ||||||||||
| Corporate | |||||||||||||||
| In U.S. offices | 16 | 26 | 16 | 51 | 8 | ||||||||||
| In offices outside the U.S. | 56 | 60 | 23 | 79 | 35 | ||||||||||
| Total | $ | 2,000 | $ | 1,879 | $ | 1,634 | $ | 1,467 | $ | 1,237 | |||||
| Gross recoveries on loans | |||||||||||||||
| Consumer | |||||||||||||||
| In U.S. offices | $ | 274 | $ | 301 | $ | 262 | $ | 235 | $ | 252 | |||||
| In offices outside the U.S. | 75 | 63 | 53 | 40 | 61 | ||||||||||
| Corporate | |||||||||||||||
| In U.S. offices | 9 | 7 | 10 | 1 | 34 | ||||||||||
| In offices outside the U.S. | 5 | 4 | 7 | 11 | 3 | ||||||||||
| Total | $ | 363 | $ | 375 | $ | 332 | $ | 287 | $ | 350 | |||||
| Net credit losses on loans (NCLs) | |||||||||||||||
| In U.S. offices | $ | 1,344 | $ | 1,231 | $ | 1,073 | $ | 932 | $ | 668 | |||||
| In offices outside the U.S. | 293 | 273 | 229 | 248 | 219 | ||||||||||
| Total | $ | 1,637 | $ | 1,504 | $ | 1,302 | $ | 1,180 | $ | 887 | |||||
| Other—net(2)(3)(4)(5)(6)(7) | $ | (46) | $ | 70 | $ | 112 | $ | 72 | $ | (84) | |||||
| Allowance for credit losses on loans (ACLL) at end of period | $ | 17,629 | $ | 17,496 | $ | 17,169 | $ | 16,974 | $ | 16,309 | |||||
| ACLL as a percentage of EOP loans(8) | 2.68 | % | 2.67 | % | 2.65 | % | 2.60 | % | 2.54 | % | |||||
| Allowance for credit losses on unfunded lending commitments (ACLUC)(9) | $ | 1,806 | $ | 1,862 | $ | 1,959 | $ | 2,151 | $ | 2,089 | |||||
| Total ACLL and ACLUC | $ | 19,435 | $ | 19,358 | $ | 19,128 | $ | 19,125 | $ | 18,398 | |||||
| Net consumer credit losses on loans | $ | 1,579 | $ | 1,429 | $ | 1,280 | $ | 1,062 | $ | 881 | |||||
| As a percentage of average consumer loans | 1.67 | % | 1.56 | % | 1.43 | % | 1.17 | % | 0.98 | % | |||||
| Net corporate credit losses on loans | $ | 58 | $ | 75 | $ | 22 | $ | 118 | $ | 6 | |||||
| As a percentage of average corporate loans | 0.08 | % | 0.11 | % | 0.03 | % | 0.16 | % | 0.01 | % | |||||
| ACLL by type at end of period(10) | |||||||||||||||
| Consumer | $ | 14,912 | $ | 14,866 | $ | 14,389 | $ | 14,119 | $ | 13,361 | |||||
| Corporate | 2,717 | 2,630 | 2,780 | 2,855 | 2,948 | ||||||||||
| Total | $ | 17,629 | $ | 17,496 | $ | 17,169 | $ | 16,974 | $ | 16,309 |
(1)On January 1, 2023, Citi adopted Accounting Standards Update (ASU) 2022-02, Financial Instruments—Credit Losses (Topic 326): TDRs and Vintage Disclosures. The ASU eliminated the accounting and disclosure requirements for TDRs, including the requirement to measure the ACLL for TDRs using a discounted cash flow (DCF) approach. On January 1, 2023, Citi recorded a $352 million decrease in the Allowance for loan losses, along with a $290 million
after-tax increase to Retained earnings.
(2)Includes all adjustments to the allowance for credit losses, such as changes in the allowance from acquisitions, dispositions, securitizations, FX translation, purchase accounting adjustments, etc.
(3)The third quarter of 2023 includes a decrease of approximately $46 million related to FX translation.
(4)The second quarter of 2023 includes an increase of approximately $70 million related to FX translation.
(5)The first quarter of 2023 includes an increase of approximately $112 million related to FX translation.
(6)The fourth quarter of 2022 includes an increase of approximately $72 million related to FX translation.
(7)The third quarter of 2022 includes a decrease of approximately $84 million related to FX translation.
(8)September 30, 2023, June 30, 2023, March 31, 2023, December 31, 2022 and September 30, 2022 exclude $7.4 billion, $5.8 billion, $5.1 billion, $5.4 billion and $3.9 billion, respectively, of loans that are carried at fair value.
(9)Represents additional credit reserves recorded as Other liabilities on the Consolidated Balance Sheet.
(10)See “Significant Accounting Policies and Significant Estimates” below. Attribution of the allowance is made for analytical purposes only and is available to absorb probable credit losses inherent in the overall portfolio.
Allowance for Credit Losses on Loans (ACLL)
The following tables detail information on Citi’s ACLL, loans and coverage ratios:
| September 30, 2023 | ||||||
|---|---|---|---|---|---|---|
| In billions of dollars | ACLL | EOP loans, net of<br>unearned income | ACLL as a<br><br>percentage of EOP loans(1) | |||
| Consumer | ||||||
| North America cards(2) | $ | 12.2 | $ | 155.7 | 7.8 | % |
| North America mortgages(3) | 0.4 | 110.0 | 0.4 | |||
| North America other(3) | 0.6 | 36.6 | 1.6 | |||
| International cards | 0.9 | 13.6 | 6.6 | |||
| International other(3) | 0.8 | 61.6 | 1.3 | |||
| Total(1) | $ | 14.9 | $ | 377.5 | 4.0 | % |
| Corporate | ||||||
| Commercial and industrial | $ | 1.6 | $ | 150.4 | 1.1 | % |
| Financial institutions | 0.3 | 60.1 | 0.5 | |||
| Mortgage and real estate | 0.6 | 23.7 | 2.5 | |||
| Installment and other | 0.2 | 47.2 | 0.4 | |||
| Total(1) | $ | 2.7 | $ | 281.4 | 1.0 | % |
| Loans at fair value(1) | N/A | $ | 7.4 | N/A | ||
| Total Citigroup | $ | 17.6 | $ | 666.3 | 2.7 | % |
| December 31, 2022 | ||||||
| --- | --- | --- | --- | --- | --- | --- |
| In billions of dollars | ACLL | EOP loans, net of<br>unearned income | ACLL as a<br><br>percentage of EOP loans(1) | |||
| Consumer | ||||||
| North America cards(2) | $ | 11.4 | $ | 150.6 | 7.6 | % |
| North America mortgages(3) | 0.5 | 100.4 | 0.5 | |||
| North America other(3) | 0.6 | 37.8 | 1.6 | |||
| International cards | 0.8 | 13.0 | 6.2 | |||
| International other(3) | 0.8 | 66.0 | 1.2 | |||
| Total(1) | $ | 14.1 | $ | 367.8 | 3.8 | % |
| Corporate | ||||||
| Commercial and industrial | $ | 1.9 | $ | 147.8 | 1.3 | % |
| Financial institutions | 0.4 | 64.9 | 0.6 | |||
| Mortgage and real estate | 0.4 | 21.9 | 1.8 | |||
| Installment and other | 0.2 | 49.4 | 0.4 | |||
| Total(1) | $ | 2.9 | $ | 284.0 | 1.0 | % |
| Loans at fair value(1) | N/A | $ | 5.4 | N/A | ||
| Total Citigroup | $ | 17.0 | $ | 657.2 | 2.6 | % |
(1)Excludes loans carried at fair value, since they do not have an ACLL and are excluded from the ACLL ratio calculation.
(2)Includes both Branded cards and Retail services. As of September 30, 2023, the $12.2 billion of ACLL represented approximately 29 months of coincident net credit loss coverage (based on 3Q23 NCLs). As of September 30, 2023, Branded cards ACLL as a percentage of EOP loans was 6.3% and Retail services ACLL
as a percentage of EOP loans was 11.0%. As of December 31, 2022, the $11.4 billion of ACLL represented approximately 43 months of coincident net credit loss coverage (based on 4Q22 NCLs). As of December 31, 2022, Branded cards ACLL as a percentage of EOP loans was 6.2% and Retail services ACLL as a percentage of EOP loans was 10.3%.
(3)Includes residential mortgages, retail loans and personal, small business and other loans, including those extended through the Private bank network.
N/A Not applicable
The following table details Citi’s corporate credit ACLL by industry exposure:
| September 30, 2023 | ||||||
|---|---|---|---|---|---|---|
| In millions of dollars, except percentages | Funded exposure(1) | ACLL | ACLL as a % of funded exposure | |||
| Transportation and industrials | $ | 58,312 | $ | 530 | 0.9 | % |
| Technology, media and telecom | 28,116 | 356 | 1.3 | |||
| Consumer retail | 34,117 | 289 | 0.8 | |||
| Real estate(2) | 49,107 | 674 | 1.4 | |||
| Commercial | 34,950 | 595 | 1.7 | |||
| Residential | 14,157 | 79 | 0.6 | |||
| Banks and finance companies | 45,506 | 218 | 0.5 | |||
| Power, chemicals, metals and mining | 18,737 | 254 | 1.4 | |||
| Energy and commodities | 12,752 | 155 | 1.2 | |||
| Health | 9,029 | 83 | 0.9 | |||
| Insurance | 3,550 | 15 | 0.4 | |||
| Asset managers and funds | 5,559 | 35 | 0.6 | |||
| Public sector | 10,730 | 58 | 0.5 | |||
| Financial markets infrastructure | 123 | — | — | |||
| Securities firms | 623 | 7 | 1.1 | |||
| Other industries(3) | 5,184 | 43 | 0.8 | |||
| Total(4) | $ | 281,445 | $ | 2,717 | 1.0 | % |
(1) Funded exposure excludes loans carried at fair value of $7.2 billion that are not subject to ACLL under the CECL standard.
(2) As of September 30, 2023, the portion of the ACLL attributed to the total funded CRE exposure (including the Private bank) was approximately 1.45%.
(3) Includes $0.8 billion of funded exposure at September 30, 2023, primarily related to commercial credit card delinquency-managed loans.
(4) As of September 30, 2023, the ACLL shown above reflects coverage of 0.4% of funded investment-grade exposure and 2.7% of funded non-investment-grade exposure.
The following table details Citi’s corporate credit ACLL by industry exposure:
| December 31, 2022 | ||||||
|---|---|---|---|---|---|---|
| In millions of dollars, except percentages | Funded exposure(1) | ACLL | ACLL as a % of funded exposure | |||
| Transportation and industrials | $ | 57,271 | $ | 699 | 1.2 | % |
| Technology, media and telecom | 28,931 | 330 | 1.1 | |||
| Consumer retail | 32,687 | 358 | 1.1 | |||
| Real estate | 48,539 | 500 | 1.0 | |||
| Commercial | 34,112 | 428 | 1.3 | |||
| Residential | 14,427 | 72 | 0.5 | |||
| Power, chemicals, metals and mining | 18,326 | 288 | 1.6 | |||
| Banks and finance companies | 42,276 | 225 | 0.5 | |||
| Energy and commodities | 13,069 | 188 | 1.4 | |||
| Asset managers and funds | 13,162 | 38 | 0.3 | |||
| Health | 8,771 | 81 | 0.9 | |||
| Insurance | 4,417 | 11 | 0.2 | |||
| Public sector | 11,736 | 58 | 0.5 | |||
| Financial markets infrastructure | 60 | — | — | |||
| Securities firms | 569 | 11 | 1.9 | |||
| Other industries(2) | 4,217 | 68 | 1.6 | |||
| Total(3) | $ | 284,031 | $ | 2,855 | 1.0 | % |
(1) Funded exposure excludes loans carried at fair value of $5.1 billion that are not subject to ACLL under the CECL standard.
(2) Includes $0.6 billion of funded exposure at December 31, 2022, primarily related to commercial credit card delinquency-managed loans.
(3) As of December 31, 2022, the ACLL shown above reflects coverage of 0.4% of funded investment-grade exposure and 3.0% of funded non-investment-grade exposure.
Non-Accrual Loans and Assets
For additional information on Citi’s non-accrual loans and assets, see “Non-Accrual Loans and Assets” in Citi’s 2022 Form 10-K.
Non-Accrual Loans
The table below summarizes Citigroup’s non-accrual loans as of the periods indicated. Non-accrual loans may still be current on interest payments. In situations where Citi reasonably expects that only a portion of the principal owed will ultimately be collected, all payments received are reflected as a reduction of principal and not as interest income. For all other non-accrual loans, cash interest receipts are generally recorded as revenue.
Citi’s non-accrual loans increased $695 million, or 27%, from June 30, 2023, primarily driven by the downgrade of two corporate loans in North America and EMEA.
| Sept. 30, | Jun. 30, | Mar. 31, | Dec. 31, | Sept. 30, | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| In millions of dollars | 2023 | 2023 | 2023 | 2022 | 2022 | |||||
| Corporate non-accrual loans by region(1)(2)(3) | ||||||||||
| North America | $ | 934 | $ | 358 | $ | 285 | $ | 138 | $ | 276 |
| EMEA | 507 | 350 | 383 | 502 | 598 | |||||
| Latin America | 407 | 428 | 462 | 429 | 555 | |||||
| Asia | 127 | 125 | 83 | 53 | 56 | |||||
| Total | $ | 1,975 | $ | 1,261 | $ | 1,213 | $ | 1,122 | $ | 1,485 |
| Corporate non-accrual loans(1)(2)(3) | ||||||||||
| Banking | $ | 1,689 | $ | 931 | $ | 868 | $ | 767 | $ | 1,085 |
| Services | 94 | 123 | 133 | 153 | 185 | |||||
| Markets | — | 1 | 3 | 3 | — | |||||
| Mexico SBMM | 192 | 206 | 209 | 199 | 215 | |||||
| Total | $ | 1,975 | $ | 1,261 | $ | 1,213 | $ | 1,122 | $ | 1,485 |
| Consumer non-accrual loans(1) | ||||||||||
| U.S. Personal Banking and Global Wealth | $ | 567 | $ | 536 | $ | 608 | $ | 541 | $ | 585 |
| Asia Consumer(4) | 25 | 24 | 29 | 30 | 30 | |||||
| Mexico Consumer | 463 | 498 | 480 | 457 | 486 | |||||
| Legacy Holdings Assets—Consumer | 247 | 263 | 278 | 289 | 300 | |||||
| Total | $ | 1,302 | $ | 1,321 | $ | 1,395 | $ | 1,317 | $ | 1,401 |
| Total non-accrual loans | $ | 3,277 | $ | 2,582 | $ | 2,608 | $ | 2,439 | $ | 2,886 |
(1)Corporate loans are placed on non-accrual status based upon a review by Citigroup’s risk officers. Corporate non-accrual loans may still be current on interest payments. With limited exceptions, the following practices are applied for consumer loans: consumer loans, excluding credit cards and mortgages, are placed on non-accrual status at 90 days past due and are charged off at 120 days past due; residential mortgage loans are placed on non-accrual status at 90 days past due and written down to net realizable value at 180 days past due. Consistent with industry conventions, Citigroup generally accrues interest on credit card loans until such loans are charged off, which typically occurs at 180 days contractual delinquency. As such, the non-accrual loan disclosures do not include credit card loans. The balances above represent non-accrual loans within Corporate loans and Consumer loans on the Consolidated Balance Sheet.
(2)Approximately 62%, 51%, 61%, 50% and 68% of Citi’s corporate non-accrual loans were performing at September 30, 2023, June 30, 2023, March 31, 2023, December 31, 2022 and September 30, 2022, respectively.
(3)The September 30, 2023 total corporate non-accrual loans represented 0.68% of total corporate loans.
(4) Asia Consumer includes balances in certain EMEA countries for all periods presented.
Modified Loans
On January 1, 2023, Citi adopted ASU 2022-02, which eliminated the accounting and disclosure requirements for TDRs (see Note 1 for additional information). See Note 13 for information on loan modifications during the nine months ended September 30, 2023.
The changes in Citigroup’s non-accrual loans were as follows:
| Three Months Ended | Three Months Ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30, 2023 | September 30, 2022 | |||||||||||
| In millions of dollars | Corporate | Consumer | Total | Corporate | Consumer | Total | ||||||
| Non-accrual loans at beginning of quarter | $ | 1,261 | $ | 1,321 | $ | 2,582 | $ | 1,655 | $ | 1,380 | $ | 3,035 |
| Additions | 1,013 | 453 | 1,466 | 372 | 417 | 789 | ||||||
| Sales and transfers to HFS | (52) | (2) | (54) | (15) | (4) | (19) | ||||||
| Returned to performing | (17) | (71) | (88) | (41) | (68) | (109) | ||||||
| Paydowns/settlements | (181) | (126) | (307) | (442) | (130) | (572) | ||||||
| Charge-offs | (45) | (227) | (272) | (43) | (168) | (211) | ||||||
| Other | (4) | (46) | (50) | (1) | (26) | (27) | ||||||
| Ending balance | $ | 1,975 | $ | 1,302 | $ | 3,277 | $ | 1,485 | $ | 1,401 | $ | 2,886 |
| Nine Months Ended | Nine Months Ended | |||||||||||
| September 30, 2023 | September 30, 2022 | |||||||||||
| In millions of dollars | Corporate | Consumer | Total | Corporate | Consumer | Total | ||||||
| Non-accrual loans at beginning of year | $ | 1,122 | $ | 1,317 | $ | 2,439 | $ | 1,553 | $ | 1,826 | $ | 3,379 |
| Additions | 1,702 | 1,234 | 2,936 | 1,913 | 1,060 | 2,973 | ||||||
| Sales and transfers to HFS | (77) | (16) | (93) | (21) | (228) | (249) | ||||||
| Returned to performing | (106) | (247) | (353) | (294) | (324) | (618) | ||||||
| Paydowns/settlements | (500) | (361) | (861) | (1,511) | (425) | (1,936) | ||||||
| Charge-offs | (152) | (615) | (767) | (148) | (463) | (611) | ||||||
| Other | (14) | (10) | (24) | (7) | (45) | (52) | ||||||
| Ending balance | $ | 1,975 | $ | 1,302 | $ | 3,277 | $ | 1,485 | $ | 1,401 | $ | 2,886 |
The table below summarizes Citigroup’s other real estate owned (OREO) assets. OREO is recorded on the Consolidated Balance Sheet within Other assets. This represents the carrying value of all real estate property acquired by foreclosure or other legal proceedings when Citi has taken possession of the collateral:
| Sept. 30, | Jun. 30, | Mar. 31, | Dec. 31, | Sept. 30, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| In millions of dollars | 2023 | 2023 | 2023 | 2022 | 2022 | ||||||||||
| OREO | |||||||||||||||
| North America | $ | 23 | $ | 17 | $ | 15 | $ | 10 | $ | 9 | |||||
| EMEA | — | — | — | — | — | ||||||||||
| Latin America | 12 | 13 | 5 | 4 | 5 | ||||||||||
| Asia | 2 | 1 | 1 | 1 | 2 | ||||||||||
| Total OREO | $ | 37 | $ | 31 | $ | 21 | $ | 15 | $ | 16 | |||||
| Non-accrual assets | |||||||||||||||
| Corporate non-accrual loans | $ | 1,975 | $ | 1,261 | $ | 1,213 | $ | 1,122 | $ | 1,485 | |||||
| Consumer non-accrual loans | 1,302 | 1,321 | 1,395 | 1,317 | 1,401 | ||||||||||
| Non-accrual loans (NAL) | $ | 3,277 | $ | 2,582 | $ | 2,608 | $ | 2,439 | $ | 2,886 | |||||
| OREO | $ | 37 | $ | 31 | $ | 21 | $ | 15 | $ | 16 | |||||
| Non-accrual assets (NAA) | $ | 3,314 | $ | 2,613 | $ | 2,629 | $ | 2,454 | $ | 2,902 | |||||
| NAL as a percentage of total loans | 0.49 | % | 0.39 | % | 0.40 | % | 0.37 | % | 0.45 | % | |||||
| NAA as a percentage of total assets | 0.14 | 0.11 | 0.11 | 0.10 | 0.12 | ||||||||||
| ACLL as a percentage of NAL(1) | 538 | 678 | 658 | 696 | 565 |
(1)The ACLL includes the allowance for Citi’s credit card portfolios and purchased credit-deteriorated loans, while the non-accrual loans exclude credit card balances (with the exception of certain international portfolios).
LIQUIDITY RISK
For additional information on funding and liquidity at Citi, including its objectives, management and measurement, see “Liquidity Risk” and “Risk Factors—Liquidity Risks” in Citi’s 2022 Form 10-K.
High-Quality Liquid Assets (HQLA)
| Citibank | Citi non-bank and other entities | Total | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| In billions of dollars | Sept. 30, 2023 | Jun. 30, 2023 | Sept. 30, 2022 | Sept. 30, 2023 | Jun. 30, 2023 | Sept. 30, 2022 | Sept. 30, 2023 | Jun. 30, 2023 | Sept. 30, 2022 | |||||||||
| Available cash | $ | 203.1 | $ | 254.3 | $ | 202.2 | $ | 5.4 | $ | 4.9 | $ | 2.1 | $ | 208.5 | $ | 259.2 | $ | 204.3 |
| U.S. sovereign | 134.2 | 120.3 | 144.6 | 79.3 | 74.7 | 69.4 | 213.5 | 195.0 | 214.0 | |||||||||
| U.S. agency/agency MBS | 48.5 | 45.1 | 52.5 | 3.6 | 3.8 | 4.7 | 52.1 | 48.9 | 57.2 | |||||||||
| Foreign government debt(1) | 74.3 | 60.9 | 63.3 | 19.9 | 19.1 | 15.7 | 94.2 | 80.0 | 79.0 | |||||||||
| Other investment grade | 0.3 | 0.5 | 2.0 | 0.7 | 0.2 | 0.6 | 1.0 | 0.7 | 2.6 | |||||||||
| Total HQLA (AVG) | $ | 460.4 | $ | 481.1 | $ | 464.6 | $ | 108.9 | $ | 102.7 | $ | 92.5 | $ | 569.3 | $ | 583.8 | $ | 557.1 |
Note: The amounts shown in the table above are presented on an average basis. For securities, the amounts represent the liquidity value that potentially could be realized and, therefore, exclude any securities that are encumbered and incorporate any haircuts applicable under the U.S. LCR rule. The table above incorporates various restrictions that could limit the transferability of liquidity between legal entities, including Section 23A of the Federal Reserve Act.
(1) Foreign government debt includes securities issued or guaranteed by foreign sovereigns, agencies and multilateral development banks. Foreign government debt securities are held largely to support local liquidity requirements and Citi’s local franchises and principally include government bonds from Japan, Korea, Mexico, India and Hong Kong.
The table above includes average amounts of HQLA held at Citigroup’s operating entities that are eligible for inclusion in the calculation of Citigroup’s consolidated Liquidity Coverage ratio (LCR), pursuant to the U.S. LCR rules. These amounts include the HQLA needed to meet the minimum requirements at these entities as well as any amounts in excess of these minimums that are available to be transferred to other entities within Citigroup. The decrease in Citi’s average HQLA from the second quarter of 2023 was primarily driven by the reduction in the Available cash component of average HQLA, due to a reduction in deposits.
As of September 30, 2023, Citigroup had approximately $937 billion of available liquidity resources to support client and business needs, including end-of-period HQLA ($558 billion); additional unencumbered HQLA, including excess liquidity held at bank entities that is non-transferable to other entities within Citigroup ($203 billion); and unused borrowing capacity from available assets not already accounted for within Citi’s HQLA to support additional advances from the Federal Home Loan Bank (FHLB) and the Federal Reserve Bank discount window ($176 billion).
Short-Term Liquidity Measurement: Liquidity Coverage Ratio (LCR)
In addition to internal 30-day liquidity stress testing performed for Citi’s major entities, operating subsidiaries and countries, Citi also monitors its liquidity by reference to the LCR. The table below details the components of Citi’s LCR calculation and HQLA in excess of net outflows for the periods indicated:
| In billions of dollars | Sept. 30, 2023 | Jun. 30, 2023 | Sept. 30, 2022 | ||||||
|---|---|---|---|---|---|---|---|---|---|
| HQLA | $ | 569.3 | $ | 583.8 | $ | 557.1 | |||
| Net outflows | 485.3 | 491.9 | 477.0 | ||||||
| LCR | 117 | % | 119 | % | 117 | % | |||
| HQLA in excess of net outflows | $ | 84.0 | $ | 91.9 | $ | 80.1 |
Note: The amounts are presented on an average basis.
As of September 30, 2023, Citigroup’s average LCR decreased 2% from the quarter ended June 30, 2023, primarily driven by the reduction in the Available cash component of average HQLA, due to a reduction in deposits.
In addition, considering Citi’s total available liquidity resources at quarter end of $937 billion, Citi maintained approximately $452 billion of excess liquidity above the stressed average net outflow of approximately $485 billion, shown in the LCR table above.
Long-Term Liquidity Measurement: Net Stable Funding Ratio (NSFR)
As previously disclosed, the U.S. banking agencies adopted a rule to assess the availability of a bank’s stable funding against a required level.
The rule became effective July 1, 2021, with public disclosure of the NSFR required on a semiannual basis beginning June 30, 2023. Citi made the required disclosure and was in compliance with the rule as of September 30, 2023.
Select Balance Sheet Items
This section provides details of select liquidity-related assets and liabilities reported on Citigroup’s Consolidated Balance Sheet on an average and end-of-period basis.
Cash and Investments
The table below details average and end-of-period Cash and due from banks, Deposits with banks (collectively cash) and Investment securities. Citi’s investment portfolio consists largely of highly liquid U.S. Treasury, U.S. agency and other sovereign bonds, with an aggregate duration of less than three years. At September 30, 2023, Citi’s EOP cash and Investment securities comprised approximately 32% of Citigroup’s total assets:
| In billions of dollars | 3Q23 | 2Q23 | 3Q22 | |||
|---|---|---|---|---|---|---|
| Cash and due from banks | $ | 27 | $ | 28 | $ | 32 |
| Deposits with banks | 260 | 310 | 256 | |||
| Investment securities | 509 | 508 | 513 | |||
| Total Citigroup cash and Investment securities (AVG) | $ | 796 | $ | 846 | $ | 801 |
| Total Citigroup cash and Investment securities (EOP) | $ | 763 | $ | 804 | $ | 808 |
Deposits
The table below details the average deposits, by business and/or segment, and the total Citigroup end-of-period deposits for each of the periods indicated:
| In billions of dollars | 3Q23 | 2Q23 | 3Q22 | |||
|---|---|---|---|---|---|---|
| Personal Banking and Wealth Management | ||||||
| U.S. Personal Banking | $ | 110 | $ | 113 | $ | 115 |
| Global Wealth | 311 | 318 | 313 | |||
| Total | $ | 421 | $ | 431 | $ | 428 |
| Institutional Clients Group | ||||||
| TTS | $ | 676 | $ | 688 | $ | 664 |
| Securities services | 120 | 125 | 131 | |||
| Markets and Banking | 25 | 24 | 22 | |||
| Total | $ | 821 | $ | 837 | $ | 817 |
| Legacy Franchises | $ | 52 | $ | 51 | $ | 50 |
| Corporate/Other | $ | 21 | $ | 19 | $ | 21 |
| Total Citigroup deposits (AVG) | $ | 1,315 | $ | 1,338 | $ | 1,316 |
| Total Citigroup deposits (EOP) | $ | 1,274 | $ | 1,320 | $ | 1,306 |
Citi’s deposit base is spread across a diversified set of countries, industries, clients and currencies.
On an average basis, deposits were largely unchanged year-over-year, as a modest increase in Legacy Franchises was offset by a decline in PBWM, and declined 2% sequentially. The increase in Legacy Franchises average deposits year-over-year was primarily driven by the impact of FX translation in Mexico Consumer/SBMM. PBWM average deposits decreased 2% year-over-year, largely reflecting clients putting cash to work in investments on Citi’s platform. ICG and Corporate/Other average deposits were largely unchanged year-over-year. The quarter-over-quarter decrease in average deposits was largely driven by Services, reflecting the impact of monetary tightening.
End-of-period deposits decreased 3% year-over-year, largely due to a reduction in Services, reflecting monetary tightening, a shift of deposits to higher-yielding investments in Global Wealth and a reduction of institutional certificates of deposit in Corporate/Other. End-of-period deposits decreased 4% sequentially, driven by ICG, PBWM and Legacy Franchises, partially offset by Corporate/Other.
The majority of Citi’s $1.3 trillion of end-of-period deposits are institutional (approximately $782 billion), and span approximately 90 countries. A large majority of these institutional deposits are within TTS, and of these, approximately 80% are from clients that use all three TTS integrated services: payments and collections, liquidity management and working capital solutions. In addition, nearly 80% of TTS deposits are from clients that have a greater than 15-year relationship with Citi. On an average basis, TTS grew deposits year-over-year at a faster rate than total Citi. Citi also has a strong consumer and wealth deposit base, with $416 billion of U.S. Personal Banking and Global Wealth end-of-period deposits, which are diversified across the Private bank, Citigold, Retail banking and Wealth at Work. As of August 2023, approximately 80% of U.S. Citigold deposit balances are with clients who have been with Citi for more than 10 years and approximately 60% of Private bank ultra-high-net-worth deposit balances are with clients who have been with Citi for more than 10 years. U.S. Personal Banking deposits are spread across six core urban centers.
Long-Term Debt
Weighted Average Maturity (WAM)
The following table presents Citigroup and its affiliates’
(including Citibank) WAM of unsecured long-term debt issued with a remaining life greater than one year:
| WAM in years | Sept. 30, 2023 | Jun. 30, 2023 | Sept. 30, 2022 |
|---|---|---|---|
| Unsecured debt | 7.4 | 7.7 | 7.8 |
| Non-bank benchmark debt | 7.1 | 7.3 | 7.4 |
| Customer-related debt | 8.2 | 8.2 | 8.6 |
| TLAC-eligible debt | 8.7 | 8.9 | 9.1 |
The WAM is calculated based on the contractual maturity of each security. For securities that are redeemable prior to maturity where the option is not held by the issuer, the WAM is calculated based on the earliest date an option becomes exercisable.
Long-Term Debt Outstanding
Citi’s long-term debt outstanding at the Citigroup parent company includes benchmark senior and subordinated debt and what Citi refers to as customer-related debt, consisting of structured notes, such as equity- and credit-linked notes, as well as non-structured notes. Citi’s issuance of customer-related debt is generally driven by customer demand and complements benchmark debt issuance as a source of funding for Citi’s non-bank entities. Citi’s long-term debt at the bank includes bank notes, FHLB advances and securitizations.
The following table presents Citi’s end-of-period total long-term debt outstanding for each of the dates indicated:
| In billions of dollars | Sept. 30, 2023 | Jun. 30, 2023 | Sept. 30, 2022 | |||
|---|---|---|---|---|---|---|
| Non-bank(1) | ||||||
| Benchmark debt: | ||||||
| Senior debt | $ | 110.3 | $ | 111.1 | $ | 112.7 |
| Subordinated debt | 24.5 | 24.5 | 22.4 | |||
| Trust preferred | 1.6 | 1.6 | 1.6 | |||
| Customer-related debt | 106.4 | 110.3 | 86.9 | |||
| Local country and other(2) | 8.5 | 7.9 | 7.0 | |||
| Total non-bank | $ | 251.3 | $ | 255.4 | $ | 230.6 |
| Bank | ||||||
| FHLB borrowings | $ | 8.5 | $ | 7.5 | $ | 7.3 |
| Securitizations(3) | 5.2 | 5.5 | 8.4 | |||
| Citibank benchmark senior debt | 7.6 | 2.6 | 2.5 | |||
| Local country and other(2) | 3.2 | 3.5 | 4.3 | |||
| Total bank | $ | 24.5 | $ | 19.1 | $ | 22.5 |
| Total long-term debt | $ | 275.8 | $ | 274.5 | $ | 253.1 |
Note: Amounts represent the current value of long-term debt on Citi’s Consolidated Balance Sheet that, for certain debt instruments, includes consideration of fair value, hedging impacts and unamortized discounts and premiums.
(1)Non-bank includes long-term debt issued to third parties by the parent holding company (Citigroup) and Citi’s non-bank subsidiaries (including
broker-dealer subsidiaries) that are consolidated into Citigroup. As of September 30, 2023, non-bank included $90.6 billion of long-term debt issued by Citi’s broker-dealer and other subsidiaries that are consolidated into Citigroup. Certain Citigroup consolidated hedging activities are also included in this line.
(2)Local country and other includes debt issued by Citi’s affiliates in support of their local operations. Within non-bank, certain secured financing is also included.
(3)Predominantly credit card securitizations, primarily backed by Branded cards receivables.
Citi’s total long-term debt outstanding increased 9% year-over-year, largely driven by issuance of customer-related debt at the non-bank entities, as well as increased senior benchmark debt and FHLB borrowings at the bank. The increase was partially offset by a decline in senior benchmark debt at the non-bank entities, as well as lower securitizations at the bank. Sequentially, long-term debt outstanding was largely unchanged, reflecting a decline in customer-related debt at the non-bank, offset by an increase in senior benchmark debt at the bank.
As part of its liability management, Citi has considered, and may continue to consider, opportunities to redeem or repurchase its long-term debt pursuant to open market purchases, tender offers or other means. Such redemptions and repurchases help reduce Citi’s overall funding costs. During the third quarter of 2023, Citi redeemed or repurchased an aggregate of approximately $5.7 billion of its outstanding long-term debt.
Long-Term Debt Issuances and Maturities
The table below details Citi’s long-term debt issuances and maturities (including repurchases and redemptions) during the periods presented:
| 3Q23 | 2Q23 | 3Q22 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| In billions of dollars | Maturities | Issuances | Maturities | Issuances | Maturities | Issuances | ||||||
| Non-bank | ||||||||||||
| Benchmark debt: | ||||||||||||
| Senior debt | $ | — | $ | — | $ | 5.3 | $ | — | $ | 7.4 | $ | 4.7 |
| Subordinated debt | — | — | 1.3 | 3.2 | 0.9 | — | ||||||
| Trust preferred | — | — | — | — | — | — | ||||||
| Customer-related debt | 11.6 | 11.2 | 12.5 | 10.6 | 7.5 | 14.5 | ||||||
| Local country and other | 0.6 | 1.0 | 0.9 | 0.6 | 1.4 | 0.8 | ||||||
| Total non-bank | $ | 12.2 | $ | 12.2 | $ | 20.0 | $ | 14.4 | $ | 17.2 | $ | 20.0 |
| Bank | ||||||||||||
| FHLB borrowings | $ | 1.0 | $ | 2.0 | $ | 2.3 | $ | 2.5 | $ | — | $ | 5.0 |
| Securitizations | 0.3 | — | 1.1 | — | 1.1 | — | ||||||
| Citibank benchmark senior debt | — | 5.0 | — | — | — | — | ||||||
| Local country and other | 0.9 | 0.7 | 0.1 | — | 0.3 | 0.1 | ||||||
| Total bank | $ | 2.2 | $ | 7.7 | $ | 3.5 | $ | 2.5 | $ | 1.4 | $ | 5.1 |
| Total | $ | 14.4 | $ | 19.9 | $ | 23.5 | $ | 16.9 | $ | 18.6 | $ | 25.1 |
The table below details Citi’s aggregate long-term debt maturities (including repurchases and redemptions) year-to-date in 2023, as well as its aggregate expected remaining long-term debt maturities by year as of September 30, 2023:
| 3Q23 YTD | Maturities | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| In billions of dollars | 2023 | 2024 | 2025 | 2026 | 2027 | 2028 | Thereafter | Total | ||||||||||
| Non-bank | ||||||||||||||||||
| Benchmark debt: | ||||||||||||||||||
| Senior debt | $ | 7.0 | $ | 3.2 | $ | 5.4 | $ | 11.9 | $ | 23.5 | $ | 6.9 | $ | 14.7 | $ | 44.7 | $ | 110.3 |
| Subordinated debt | 1.3 | — | 0.9 | 4.9 | 2.3 | 3.6 | 2.0 | 10.8 | 24.5 | |||||||||
| Trust preferred | — | — | — | — | — | — | — | 1.6 | 1.6 | |||||||||
| Customer-related debt | 33.1 | 4.1 | 25.1 | 16.2 | 9.5 | 9.6 | 7.2 | 34.7 | 106.4 | |||||||||
| Local country and other | 1.9 | 0.6 | 1.0 | 1.8 | 0.6 | — | 1.0 | 3.5 | 8.5 | |||||||||
| Total non-bank | $ | 43.3 | $ | 7.9 | $ | 32.4 | $ | 34.8 | $ | 35.9 | $ | 20.1 | $ | 24.9 | $ | 95.3 | $ | 251.3 |
| Bank | ||||||||||||||||||
| FHLB borrowings | $ | 3.3 | $ | 1.0 | $ | 5.0 | $ | 2.5 | $ | — | $ | — | $ | — | $ | — | $ | 8.5 |
| Securitizations | 2.4 | — | 1.2 | 1.6 | — | 0.8 | 1.0 | 0.6 | 5.2 | |||||||||
| Citibank benchmark senior debt | — | — | 2.6 | 2.5 | — | — | 2.5 | — | 7.6 | |||||||||
| Local country and other | 1.3 | 0.1 | 1.0 | 0.2 | 0.5 | — | — | 1.4 | 3.2 | |||||||||
| Total bank | $ | 7.0 | $ | 1.1 | $ | 9.8 | $ | 6.8 | $ | 0.5 | $ | 0.8 | $ | 3.5 | $ | 2.0 | $ | 24.5 |
| Total long-term debt | $ | 50.3 | $ | 9.0 | $ | 42.2 | $ | 41.6 | $ | 36.4 | $ | 20.9 | $ | 28.4 | $ | 97.3 | $ | 275.8 |
Secured Funding Transactions and Short-Term Borrowings
Citi supplements its primary sources of funding with short-term financings that generally include (i) secured funding transactions consisting of securities loaned or sold under agreements to repurchase, i.e., repos, and (ii) to a lesser extent, short-term borrowings consisting of commercial paper and borrowings from the FHLB and other market participants.
Secured Funding Transactions
Secured funding is primarily accessed through Citi’s broker-dealer subsidiaries, with a smaller portion executed through Citi’s bank entities to efficiently fund both (i) secured lending activity and (ii) a portion of the securities inventory held in the context of market making and customer activities. Secured funding transactions are predominantly collateralized by government debt securities. Generally, changes in the level of Citi’s secured funding are primarily due to fluctuations in secured lending activity in the matched book (as described below) and changes in securities inventory. In order to maintain reliable funding under a wide range of market conditions, Citi manages risks related to its secured funding by establishing secured funding limits and conducting daily stress tests that account for risks related to capacity, tenor, haircut, collateral type, counterparty and client actions.
Secured funding of $257 billion as of September 30, 2023 increased 27% year-over-year, largely driven by additional financing to support increases in trading-related assets within Citi’s broker-dealer subsidiaries. As of the quarter ended September 30, 2023, on an average basis, secured funding was $275 billion. The portion of secured funding in the broker-dealer subsidiaries that funds secured lending is commonly referred to as “matched book” activity and is primarily secured by high-quality liquid securities such as U.S. Treasury securities, U.S. agency securities and foreign government debt securities. Other “matched book” activity is secured by less liquid securities, including equity securities, corporate bonds and asset-backed securities, the tenor of which is generally equal to or longer than the tenor of the corresponding assets. As indicated above, the remaining portion of secured funding is used to fund securities inventory held in the context of market making and customer activities.
Short-Term Borrowings
Citi’s short-term borrowings of $43 billion as of the third quarter of 2023 decreased 9% year-over-year and increased 7% sequentially, driven by higher commercial paper (see Note 17 for further information on Citigroup’s and its affiliates’ outstanding short-term borrowings).
Credit Ratings
The table below presents the ratings for Citigroup and Citibank as of September 30, 2023. While not included in the table below, the long-term and short-term ratings of Citigroup Global Markets Holdings Inc. (CGMHI) were A+/F1 at Fitch, A2/P-1 at Moody’s Investors Service and A/A-1 at S&P Global Ratings as of September 30, 2023.
Ratings as of September 30, 2023
| Citigroup Inc. | Citibank, N.A. | |||||
|---|---|---|---|---|---|---|
| Long-term | Short-term | Outlook | Long-<br>term | Short-<br>term | Outlook | |
| Fitch Ratings (Fitch) | A | F1 | Stable | A+ | F1 | Stable |
| Moody’s Investors Service (Moody’s) | A3 | P-2 | Stable | Aa3 | P-1 | Stable |
| S&P Global Ratings (S&P) | BBB+ | A-2 | Stable | A+ | A-1 | Stable |
Potential Impacts of Ratings Downgrades
Ratings downgrades by Fitch, Moody’s or S&P could negatively impact Citigroup’s and/or Citibank’s funding and liquidity due to reduced funding capacity, including derivative triggers, which could take the form of cash obligations and collateral requirements.
For additional information on the impact of credit rating changes on Citi and its applicable subsidiaries, see “Risk Factors—Liquidity Risks” and “Credit Ratings” in Citi’s 2022 Form 10-K.
Citigroup Inc. and Citibank—Potential Derivative Triggers
As of September 30, 2023, Citi estimates that a hypothetical one-notch downgrade of the senior debt/long-term rating of Citigroup Inc. across all three major rating agencies could impact Citigroup’s funding and liquidity due to derivative triggers by approximately $0.3 billion, compared to $0.4 billion as of June 30, 2023. Other funding sources, such as secured financing transactions and other margin requirements, for which there are no explicit triggers, could also be adversely affected.
As of September 30, 2023, Citi estimates that a hypothetical one-notch downgrade of the senior debt/long-term rating of Citibank across all three major rating agencies could impact Citibank’s funding and liquidity due to derivative triggers by approximately $0.4 billion, compared to $0.4 billion as of June 30, 2023. Other funding sources, such as secured funding transactions and other margin requirements, for which there are no explicit triggers, could also be adversely impacted.
In total, as of September 30, 2023, Citi estimates that a one-notch downgrade of Citigroup and Citibank across all three major rating agencies could result in increased aggregate cash obligations and collateral requirements of approximately $0.7 billion, compared to $0.8 billion as of June 30, 2023 (see also Note 19). As detailed under “High-Quality Liquid Assets” above, Citigroup has various liquidity resources available to its bank and non-bank entities in part as a contingency for the potential events described above.
Citibank—Additional Potential Impacts
In addition to the above derivative triggers, Citi believes that a potential downgrade of Citibank’s senior debt/long-term rating across any of the three major rating agencies could also have an adverse impact on the commercial paper/short-term rating of Citibank. Citibank has provided liquidity commitments to consolidated asset-backed commercial paper conduits, primarily in the form of asset purchase agreements. As of September 30, 2023, Citibank had liquidity commitments of approximately $11.0 billion to consolidated asset-backed commercial paper conduits, which was largely unchanged from June 30, 2023 (see Note 20 for additional information).
In addition to the above-referenced liquidity resources of certain Citibank entities, Citibank could reduce the funding and liquidity risk, if any, of the potential downgrades described above through mitigating actions, including repricing or reducing certain commitments to commercial paper conduits. In the event of the potential downgrades described above, Citi believes that certain corporate customers could reevaluate their deposit relationships with Citibank. This reevaluation could result in clients adjusting their discretionary deposit levels or changing their depository institution, which could potentially reduce certain deposit levels at Citibank. However, Citi could choose to adjust pricing, offer alternative deposit products to its existing customers or seek to attract deposits from new customers, in addition to the mitigating actions referenced above.
MARKET RISK
Market risk arises from both Citi’s trading and non-trading portfolios. For additional information on market risk and market risk management at Citi, see “Market Risk—Overview” and “Risk Factors” in Citi’s 2022 Form 10-K.
Market Risk of Non-Trading Portfolios
Market risk from non-trading portfolios stems predominantly from the potential impact of changes in interest rates and foreign exchange rates on Citi’s net interest income and on Citi’s Accumulated other comprehensive income (loss) (AOCI) from its investment securities portfolios. Market risk from non-trading portfolios also includes the potential impact of changes in foreign exchange rates on Citi’s capital invested in foreign currencies.
Banking Book Interest Rate Risk
For interest rate risk purposes, Citi’s non-trading portfolios are referred to as the Banking Book. Management of interest rate risk in the Banking Book is governed by Citi’s Non-Trading Market Risk Policy. Management’s Asset & Liability Committee (ALCO) establishes Citi’s risk appetite and related limits for interest rate risk in the Banking Book, which are subject to approval by Citigroup’s Board of Directors. Corporate Treasury is responsible for the day-to-day management of Citi’s Banking Book interest rate risk as well as periodically reviewing it with the ALCO. Citi’s Banking Book interest rate risk management is also subject to independent oversight from the second line of defense team reporting to the Chief Risk Officer.
Changes in interest rates impact Citi’s net income, AOCI and CET1. These changes primarily affect Citi’s Banking Book through net interest income, due to a variety of risk factors, including:
•Differences in timing and amounts of the maturity or repricing of assets, liabilities and off-balance sheet instruments;
•Changes in the level and/or shape of interest rate curves;
•Client behavior in response to changes in interest rates (e.g., mortgage prepayments, deposit betas); and
•Changes in the maturity of instruments resulting from changes in the interest rate environment.
As part of their ongoing activities, Citi’s businesses generate interest rate-sensitive positions from their client-facing products, such as loans and deposits. The component of this interest rate risk that can be hedged is transferred via Citi’s funds transfer pricing process to Corporate Treasury. Corporate Treasury uses various tools to manage the total interest rate risk position within the established risk appetite and target Citi’s desired risk profile, including its investment securities portfolio, company-issued debt and interest rate derivatives.
In addition, Citi uses multiple metrics to measure its Banking Book interest rate risk. Interest Rate Exposure (IRE) is a key metric that analyzes the impact of a range of scenarios on Citi’s Banking Book net interest income and certain other interest rate-sensitive income versus a base case. IRE does not represent a forecast of Citi’s net interest income.
The scenarios, methodologies and assumptions used in this analysis are periodically evaluated and enhanced in response to changes in the market environment, changes in Citi’s balance sheet composition, enhancements in Citi’s modeling and other factors.
Since the third quarter of 2022, Citi has employed enhanced IRE methodologies and changes to certain assumptions. The changes included, among other things, assumptions around the projected balance sheet and revisions to the treatment of certain business contributions (notably accrual positions in ICG’s Markets businesses). These changes resulted in a higher impact to Citi’s net interest income over a 12-month period.
Under the enhanced methodology, Citi utilizes the most recent quarter-end balance sheet, assuming no changes to its composition and size over the forecasted horizon (holding the balance sheet static). The forecasts incorporate expectations and assumptions of deposit pricing, loan spreads and mortgage prepayment behavior implied by the interest rate curves in each scenario. The base case scenario reflects the market-implied forward interest rates, and sensitivity scenarios assume instantaneous shocks to the base case. The forecasts do not assume Citi takes any risk-mitigating actions in response to changes in the interest rate environment. Certain interest rates are subject to flooring assumptions in downward rate scenarios. Deposit pricing sensitivities (i.e., deposit betas), are informed by historical and expected behavior. Actual deposit pricing could differ from the assumptions used in these forecasts.
Citi’s IRE analysis primarily reflects the impacts from the following Banking Book assets and liabilities: loans, client deposits, Citi’s deposits with other banks, investment securities, long-term debt, any related interest rate hedges and the funds transfer pricing of positions in total trading and credit portfolio value at risk (VAR). It excludes impacts from any positions that are included in total trading and credit portfolio VAR.
In addition to IRE, Citi analyzes economic value sensitivity (EVS) as a longer-term interest rate risk metric. EVS is a net present value (NPV)–based measure of the lifetime cash flows of Citi’s Banking Book. It estimates the interest rate sensitivity of the Banking Book’s economic value from longer-term assets being potentially funded with shorter-term liabilities, or vice versa. Citi manages EVS within risk limits approved by Citigroup’s Board of Directors that are aligned with Citi’s risk appetite.
Interest Rate Risk of Investment Portfolios—Impact on AOCI
Citi also measures the potential impacts of changes in interest rates on the value of its AOCI, which can in turn impact Citi’s common equity and tangible common equity. This will impact Citi’s CET1 and other regulatory capital ratios. Citi seeks to manage its exposure to changes in the market level of interest rates, while limiting the potential impact on its AOCI and regulatory capital position.
AOCI at risk is managed as part of the Company-wide interest rate risk position. AOCI at risk considers potential
changes in AOCI (and the corresponding impact on the CET1 Capital ratio) relative to Citi’s capital generation capacity.
Citi uses 100 basis point (bps) shocks in each scenario to reflect its net interest income sensitivity to unanticipated changes in market interest rates, as potential monetary policy decisions and changes in economic conditions may be reflected in current market-implied forward rates. The following table presents the 12-month estimated impact to Citi’s net interest income, AOCI and the CET1 Capital ratio, each assuming an unanticipated parallel instantaneous 100 bps increase in interest rates:
| In millions of dollars, except as otherwise noted | Sept. 30, 2023 | Jun. 30, 2023 | Sept. 30, 2022 | ||||||
|---|---|---|---|---|---|---|---|---|---|
| Parallel interest rate shock +100 bps | |||||||||
| Interest rate exposure(1) | |||||||||
| U.S. dollar | $ | 82 | $ | (55) | $ | 677 | |||
| All other currencies | 1,214 | 1,468 | 1,483 | ||||||
| Total | $ | 1,296 | $ | 1,413 | $ | 2,160 | |||
| As a percentage of average interest-earning assets | 0.06 | % | 0.06 | % | 0.10 | % | |||
| Estimated initial negative impact to AOCI (after-tax)(2) | $ | (807) | $ | (1,416) | $ | (969) | |||
| Estimated initial impact on CET1 Capital ratio (bps) from AOCI scenario | (12) | (12) | (9) |
(1)Excludes trading book and fair value option banking book portfolios and replaces them with the associated transfer pricing.
(2)Includes the effect of changes in interest rates on AOCI related to investment securities, cash flow hedges and pension liability adjustments.
The All other currencies of $1,214 million as of September 30, 2023 in the table above includes the impact from the following top five non-U.S. dollar currencies, which represents approximately 50% of the total non-U.S. dollar currency impact: approximately $0.2 billion from the Japanese yen, and approximately $0.1 billion each from the Singapore dollar, Swiss franc, Indian rupee and British pound sterling. These impacts per currency are generally in the same direction (estimated positive impact in the +100 bps shock scenario) and not offsetting.
Citi’s balance sheet is asset sensitive (assets reprice faster than liabilities), resulting in higher net interest income in increasing interest rate scenarios. The estimated impact to Citi’s net interest income in a 100 bps upward rate shock scenario as of the third quarter of 2023 decreased quarter-over-quarter and year-over-year, primarily due to changes in deposit composition and levels, partially offset by hedging actions. At progressively higher interest rate levels, the marginal net interest income benefit is lower, as Citi assumes it will pass on a larger share of rate changes to depositors (i.e., higher betas), further reducing Citi’s IRE sensitivity. Currency-specific interest rate changes and balance sheet factors may drive quarter-to-quarter volatility in Citi’s estimated IRE.
In a 100 bps upward rate shock scenario, Citi expects that the approximate $0.8 billion initial negative impact to AOCI could potentially be offset in shareholders’ equity through the expected recovery of the impact on AOCI through accretion of Citi’s investment portfolio and expected net interest income benefit over a period of approximately four months.
Scenario Analysis
The following table presents the estimated impact to Citi’s net interest income, AOCI and CET1 Capital ratio (on a fully implemented basis) under six different scenarios of changes in interest rates for the U.S. dollar and all other currencies in which Citi has invested capital as of September 30, 2023. The interest rate scenarios are also impacted by convexity related to mortgage products.
| In millions of dollars, except as otherwise noted | Scenario 1 | Scenario 2 | Scenario 3 | Scenario 4 | Scenario 5 | Scenario 6 | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Overnight rate change (bps) | 100 | 100 | — | — | (100) | (100) | ||||||
| 10-year rate change (bps) | 100 | — | 100 | (100) | — | (100) | ||||||
| Interest rate exposure | ||||||||||||
| U.S. dollar | $ | 82 | $ | 16 | $ | 56 | $ | (83) | $ | (504) | $ | (608) |
| All other currencies(1) | 1,214 | 1,034 | 176 | (179) | (916) | (1,081) | ||||||
| Total | $ | 1,296 | $ | 1,050 | $ | 232 | $ | (262) | $ | (1,420) | $ | (1,689) |
| Estimated initial impact to AOCI (after-tax)(2) | $ | (807) | $ | (1,008) | $ | 245 | $ | (445) | $ | 995 | $ | 645 |
| Estimated initial impact to CET1 Capital ratio (bps) from AOCI scenario | (12) | (8) | (3) | 2 | 8 | 11 |
Note: Each scenario assumes that the rate change will occur instantaneously. Changes in interest rates for maturities between the overnight rate and the 10-year rate are interpolated. The interest rate exposure in the table above assumes no change in deposit size or mix from the baseline forecast included in the different interest scenarios presented. As a result, in higher interest rate scenarios, customer activity resulting in a shift from non-interest-bearing and low interest rate deposit products to higher-yielding deposits would reduce the expected benefit to net interest income. Conversely, in lower interest rate scenarios, customer activity resulting in a shift from higher-yielding deposits to non-interest-bearing and low interest rate deposit products would reduce the expected decrease to net interest income.
(1)Scenario 1 includes the impact from the following top five non-U.S. dollar currencies, which represents approximately 50% of the total non-U.S. dollar currency impact: approximately $0.2 billion from the Japanese yen, and approximately $0.1 billion each from the Singapore dollar, Swiss franc, Indian rupee and British pound sterling. These impacts per currency are generally in the same direction (estimated positive impact in the +100 bps shock scenario) and not offsetting.
(2)Includes the effect of changes in interest rates on AOCI related to investment securities, cash flow hedges and pension liability adjustments.
As shown in the table above, the estimated impact to Citi’s net interest income is larger under Scenario 2 than Scenario 3, as Citi’s Banking Book has relatively higher interest rate exposure to the short end of the yield curve. For non-U.S. dollar currencies, exposure to downward rate shocks is smaller in magnitude as a result of Citi’s flooring assumption, given low rate levels for certain non-U.S. dollar currencies.
The magnitude of the impact to AOCI is greater under Scenario 2 compared to Scenario 3. This is because the combination of changes to Citi’s investment portfolio, partially offset by changes related to Citi’s pension liabilities, results in a net position that is more sensitive to rates at shorter- and intermediate-term maturities.
Changes in Foreign Exchange Rates—Impacts on AOCI and Capital
As of September 30, 2023, Citi estimates that an unanticipated parallel instantaneous 5% appreciation of the U.S. dollar against all of the other currencies in which Citi has invested capital could reduce Citi’s tangible common equity (TCE) by approximately $1.7 billion, or 0.96%, as a result of changes to Citi’s CTA in AOCI, net of hedges. This impact would be primarily due to changes in the value of the Mexican peso, Euro and Indian rupee.
This impact is also before any mitigating actions Citi may take, including ongoing management of its foreign currency
translation exposure. Specifically, as currency movements change the value of Citi’s net investments in foreign currency-denominated capital, these movements also change the value of Citi’s risk-weighted assets denominated in those currencies.
This, coupled with Citi’s foreign currency hedging strategies, such as foreign currency borrowings, foreign currency forwards and other currency hedging instruments, lessens the impact of foreign currency movements on Citi’s CET1 Capital ratio. Changes in these hedging strategies, as well as hedging costs, divestitures and tax impacts, can further affect the actual impact of changes in foreign exchange rates on Citi’s capital compared to an unanticipated parallel shock, as described above.
The effect of Citi’s ongoing management strategies with respect to quarterly changes in foreign exchange rates, and the quarterly impact of these changes on Citi’s TCE and CET1 Capital ratio, are shown in the table below. See Note 18 for additional information on the changes in AOCI.
| For the quarter ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| In millions of dollars, except as otherwise noted | Sept. 30, 2023 | Jun. 30, 2023 | Sept. 30, 2022 | ||||||
| Change in FX spot rate(1) | (2.5) | % | (0.2) | % | (4.5) | % | |||
| Change in TCE due to FX translation, net of hedges | $ | (1,314) | $ | (98) | $ | (2,121) | |||
| As a percentage of TCE | (0.8) | % | (0.1) | % | (1.4) | % | |||
| Estimated impact to CET1 Capital ratio (on a fully implemented basis) <br>due to changes in FX translation, net of hedges (bps) | (1) | — | (2) |
(1) FX spot rate change is a weighted average based on Citi’s quarterly average GAAP capital exposure to foreign countries.
Interest Revenue/Expense and Net Interest Margin (NIM)
| 3rd Qtr. | 2nd Qtr. | 3rd Qtr. | Change | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| In millions of dollars, except as otherwise noted | 2023 | 2023 | 2022 | 3Q23 vs. 3Q22 | |||||||||||
| Interest revenue(1) | $ | 34,860 | $ | 32,660 | $ | 19,965 | 75 | % | |||||||
| Interest expense(2) | 21,009 | 18,747 | 7,356 | 186 | |||||||||||
| Net interest income, taxable equivalent basis(1) | $ | 13,851 | $ | 13,913 | $ | 12,609 | 10 | % | |||||||
| Interest revenue—average rate(3) | 6.27 | % | 5.82 | % | 3.65 | % | 262 | bps | |||||||
| Interest expense—average rate | 4.67 | 4.15 | 1.68 | 299 | bps | ||||||||||
| Net interest margin(3)(4) | 2.49 | 2.48 | 2.31 | 18 | bps | ||||||||||
| Interest rate benchmarks | |||||||||||||||
| Two-year U.S. Treasury note—average rate | 4.92 | % | 4.26 | % | 3.38 | % | 154 | bps | |||||||
| 10-year U.S. Treasury note—average rate | 4.15 | 3.60 | 3.10 | 105 | bps | ||||||||||
| 10-year vs. two-year spread | (77) | bps | (66) | bps | (28) | bps |
(1)Interest revenue and Net interest income include the taxable equivalent adjustments primarily related to the tax-exempt bond portfolio and certain tax-advantaged loan programs of $23 million, $13 million and $46 million for the three months ended September 30, 2023, June 30, 2023 and September 30, 2022, respectively.
(2)Interest expense associated with certain hybrid financial instruments, which are classified as Long-term debt and accounted for at fair value, is reported together with any changes in fair value as part of Principal transactions in the Consolidated Statement of Income and is therefore not reflected in Interest expense in the table above.
(3)The average rate on interest revenue and net interest margin reflects the taxable equivalent gross-up adjustment. See footnote 1 above.
(4)Citi’s NIM is calculated by dividing net interest income by average interest-earning assets.
Non-ICG Markets Net Interest Income
| 3rd Qtr. | 2nd Qtr. | 3rd Qtr. | Change | |||||
|---|---|---|---|---|---|---|---|---|
| In millions of dollars | 2023 | 2023 | 2022 | 3Q23 vs. 3Q22 | ||||
| Net interest income—taxable equivalent basis(1) per above | $ | 13,851 | $ | 13,913 | $ | 12,609 | 10 | % |
| ICG Markets net interest income—taxable equivalent basis(1) | 1,578 | 1,983 | 1,230 | 28 | ||||
| Non-ICG Markets net interest income—taxable equivalent basis(1) | $ | 12,273 | $ | 11,930 | $ | 11,379 | 8 | % |
(1)Interest revenue and Net interest income include the taxable equivalent adjustments discussed in the table above.
Citi’s net interest income in the third quarter of 2023 increased 10% to $13.8 billion versus the prior-year period. As presented in the table above, Citi’s net interest income on a taxable equivalent basis also increased 10% year-over-year, or $1.2 billion. The increase was driven by higher net interest income in non-ICG Markets, which increased 8%, and ICG Markets, which increased 28%. The increase in net interest income in non-ICG Markets primarily reflected higher interest rates and growth in U.S. cards interest-earning balances, partially offset by a reduction in net interest income due to the exited markets and continued wind-downs in Legacy Franchises. The increase in ICG Markets net interest income was primarily driven by higher interest rates as well as a change in the mix of trading positions in support of client activity.
Citi’s net interest margin was 2.49% on a taxable equivalent basis in the third quarter of 2023, an increase of 1 basis point from the prior quarter, primarily driven by beneficial balance sheet mix changes and higher interest rates, largely offset by the absence of the benefit of dividend seasonality in ICG Markets in the prior quarter.
Additional Interest Rate Details
Average Balances and Interest Rates—Assets(1)(2)(3)
Taxable Equivalent Basis
| Quarterly—Assets | Average balance | Interest revenue | % Average rate | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 3rd Qtr. | 2nd Qtr. | 3rd Qtr. | 3rd Qtr. | 2nd Qtr. | 3rd Qtr. | 3rd Qtr. | 2nd Qtr. | 3rd Qtr. | ||||||||||
| In millions of dollars, except rates | 2023 | 2023 | 2022 | 2023 | 2023 | 2022 | 2023 | 2023 | 2022 | |||||||||
| Deposits with banks(4) | $ | 260,159 | $ | 310,047 | $ | 256,444 | $ | 2,645 | $ | 3,049 | $ | 1,218 | 4.03 | % | 3.94 | % | 1.88 | % |
| Securities borrowed and purchased under agreements to resell(5) | ||||||||||||||||||
| In U.S. offices | $ | 165,557 | $ | 182,676 | $ | 200,951 | $ | 3,577 | $ | 3,227 | $ | 1,285 | 8.57 | % | 7.09 | % | 2.54 | % |
| In offices outside the U.S.(4) | 187,051 | 183,028 | 160,768 | 3,786 | 3,027 | 891 | 8.03 | 6.63 | 2.20 | |||||||||
| Total | $ | 352,608 | $ | 365,704 | $ | 361,719 | $ | 7,363 | $ | 6,254 | $ | 2,176 | 8.28 | % | 6.86 | % | 2.39 | % |
| Trading account assets(6)(7) | ||||||||||||||||||
| In U.S. offices | $ | 194,531 | $ | 180,214 | $ | 143,102 | $ | 2,334 | $ | 2,071 | $ | 1,196 | 4.76 | % | 4.61 | % | 3.32 | % |
| In offices outside the U.S.(4) | 151,333 | 149,015 | 129,894 | 1,559 | 1,681 | 795 | 4.09 | 4.52 | 2.43 | |||||||||
| Total | $ | 345,864 | $ | 329,229 | $ | 272,996 | $ | 3,893 | $ | 3,752 | $ | 1,991 | 4.47 | % | 4.57 | % | 2.89 | % |
| Investments | ||||||||||||||||||
| In U.S. offices | ||||||||||||||||||
| Taxable | $ | 333,520 | $ | 337,957 | $ | 355,293 | $ | 2,287 | $ | 2,238 | $ | 1,521 | 2.72 | % | 2.66 | % | 1.70 | % |
| Exempt from U.S. income tax | 11,432 | 11,577 | 11,809 | 120 | 108 | 110 | 4.16 | 3.74 | 3.70 | |||||||||
| In offices outside the U.S.(4) | 163,902 | 158,415 | 146,312 | 2,320 | 2,110 | 1,379 | 5.62 | 5.34 | 3.74 | |||||||||
| Total | $ | 508,854 | $ | 507,949 | $ | 513,414 | $ | 4,727 | $ | 4,456 | $ | 3,010 | 3.69 | % | 3.52 | % | 2.33 | % |
| Consumer loans(8) | ||||||||||||||||||
| In U.S. offices | $ | 297,178 | $ | 289,122 | $ | 273,324 | $ | 7,807 | $ | 7,294 | $ | 6,064 | 10.42 | % | 10.12 | % | 8.80 | % |
| In offices outside the U.S.(4) | 78,454 | 78,730 | 83,023 | 1,802 | 1,668 | 1,316 | 9.11 | 8.50 | 6.29 | |||||||||
| Total | $ | 375,632 | $ | 367,852 | $ | 356,347 | $ | 9,609 | $ | 8,962 | $ | 7,380 | 10.15 | % | 9.77 | % | 8.22 | % |
| Corporate loans(8) | ||||||||||||||||||
| In U.S. offices | $ | 133,944 | $ | 135,716 | $ | 141,539 | $ | 1,862 | $ | 1,791 | $ | 1,449 | 5.52 | % | 5.29 | % | 4.06 | % |
| In offices outside the U.S.(4) | 152,710 | 150,023 | 156,832 | 3,585 | 3,311 | 1,981 | 9.31 | 8.85 | 5.01 | |||||||||
| Total | $ | 286,654 | $ | 285,739 | $ | 298,371 | $ | 5,447 | $ | 5,102 | $ | 3,430 | 7.54 | % | 7.16 | % | 4.56 | % |
| Total loans(8) | ||||||||||||||||||
| In U.S. offices | $ | 431,122 | $ | 424,838 | $ | 414,863 | $ | 9,669 | $ | 9,085 | $ | 7,513 | 8.90 | % | 8.58 | % | 7.18 | % |
| In offices outside the U.S.(4) | 231,164 | 228,753 | 239,855 | 5,387 | 4,979 | 3,297 | 9.25 | 8.73 | 5.45 | |||||||||
| Total | $ | 662,286 | $ | 653,591 | $ | 654,718 | $ | 15,056 | $ | 14,064 | $ | 10,810 | 9.02 | % | 8.63 | % | 6.55 | % |
| Other interest-earning assets(9) | $ | 76,400 | $ | 85,083 | $ | 110,619 | $ | 1,176 | $ | 1,085 | $ | 760 | 6.11 | % | 5.11 | % | 2.73 | % |
| Total interest-earning assets | $ | 2,206,171 | $ | 2,251,603 | $ | 2,169,910 | $ | 34,860 | $ | 32,660 | $ | 19,965 | 6.27 | % | 5.82 | % | 3.65 | % |
| Non-interest-earning assets(6) | $ | 207,608 | $ | 214,011 | $ | 229,536 | ||||||||||||
| Total assets | $ | 2,413,779 | $ | 2,465,614 | $ | 2,399,446 | ||||||||||||
| Nine Months—Assets | Average balance | Interest revenue | % Average rate | |||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||||
| Nine Months | Nine Months | Nine Months | Nine Months | Nine Months | Nine Months | |||||||||||||
| In millions of dollars, except rates | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | ||||||||||||
| Deposits with banks(4) | $ | 299,449 | $ | 248,119 | $ | 8,725 | $ | 2,172 | 3.90 | % | 1.17 | % | ||||||
| Securities borrowed and purchased under agreements to resell(5) | ||||||||||||||||||
| In U.S. offices | $ | 178,268 | $ | 189,671 | $ | 9,644 | $ | 1,852 | 7.23 | % | 1.31 | % | ||||||
| In offices outside the U.S.(4) | 183,852 | 161,954 | 9,147 | 1,523 | 6.65 | 1.26 | ||||||||||||
| Total | $ | 362,120 | $ | 351,625 | $ | 18,791 | $ | 3,375 | 6.94 | % | 1.28 | % | ||||||
| Trading account assets(6)(7) | ||||||||||||||||||
| In U.S. offices | $ | 179,654 | $ | 139,682 | $ | 6,178 | $ | 2,420 | 4.60 | % | 2.32 | % | ||||||
| In offices outside the U.S.(4) | 144,985 | 133,449 | 4,215 | 2,381 | 3.89 | 2.39 | ||||||||||||
| Total | $ | 324,639 | $ | 273,131 | $ | 10,393 | $ | 4,801 | 4.28 | % | 2.35 | % | ||||||
| Investments | ||||||||||||||||||
| In U.S. offices | ||||||||||||||||||
| Taxable | $ | 338,751 | $ | 355,483 | $ | 6,674 | $ | 3,674 | 2.63 | % | 1.38 | % | ||||||
| Exempt from U.S. income tax | 11,539 | 11,773 | 344 | 313 | 3.99 | 3.55 | ||||||||||||
| In offices outside the U.S.(4) | 160,819 | 150,016 | 6,324 | 3,477 | 5.26 | 3.10 | ||||||||||||
| Total | $ | 511,109 | $ | 517,272 | $ | 13,342 | $ | 7,464 | 3.49 | % | 1.93 | % | ||||||
| Consumer loans(8) | ||||||||||||||||||
| In U.S. offices | $ | 289,931 | $ | 264,941 | $ | 22,152 | $ | 16,457 | 10.22 | % | 8.30 | % | ||||||
| In offices outside the U.S.(4) | 79,120 | 88,762 | 5,043 | 3,786 | 8.52 | 5.70 | ||||||||||||
| Total | $ | 369,051 | $ | 353,703 | $ | 27,195 | $ | 20,243 | 9.85 | % | 7.65 | % | ||||||
| Corporate loans(8) | ||||||||||||||||||
| In U.S. offices | $ | 135,798 | $ | 140,198 | $ | 5,389 | $ | 3,846 | 5.31 | % | 3.67 | % | ||||||
| In offices outside the U.S.(4) | 151,689 | 159,693 | 9,847 | 4,978 | 8.68 | 4.17 | ||||||||||||
| Total | $ | 287,487 | $ | 299,891 | $ | 15,236 | $ | 8,824 | 7.09 | % | 3.93 | % | ||||||
| Total loans(8) | ||||||||||||||||||
| In U.S. offices | $ | 425,729 | $ | 405,139 | $ | 27,541 | $ | 20,303 | 8.65 | % | 6.70 | % | ||||||
| In offices outside the U.S.(4) | 230,809 | 248,455 | 14,890 | 8,764 | 8.63 | 4.72 | ||||||||||||
| Total | $ | 656,538 | $ | 653,594 | $ | 42,431 | $ | 29,067 | 8.64 | % | 5.95 | % | ||||||
| Other interest-earning assets(9) | $ | 83,080 | $ | 117,354 | $ | 3,277 | $ | 1,953 | 5.27 | % | 2.23 | % | ||||||
| Total interest-earning assets | $ | 2,236,935 | $ | 2,161,095 | $ | 96,959 | $ | 48,832 | 5.80 | % | 3.02 | % | ||||||
| Non-interest-earning assets(6) | $ | 210,277 | $ | 223,418 | ||||||||||||||
| Total assets | $ | 2,447,212 | $ | 2,384,513 |
(1)Interest revenue and Net interest income include the taxable equivalent adjustments primarily related to the tax-exempt bond portfolio and certain tax-advantaged loan programs of $23 million, $13 million and $46 million for the three months ended September 30, 2023, June 30, 2023 and September 30, 2022, respectively, and $80 million and $132 million for the nine months ended September 30, 2023 and 2022, respectively.
(2)Interest rates and amounts include the effects of risk management activities associated with the respective asset categories.
(3)Monthly or quarterly averages have been used by certain subsidiaries where daily averages are unavailable.
(4)Average rates reflect prevailing local interest rates, including inflationary effects and monetary corrections in certain countries.
(5)Average volumes of securities borrowed or purchased under agreements to resell are reported net pursuant to ASC 210-20-45. However, Interest revenue excludes the impact of ASC 210-20-45.
(6)The fair value carrying amounts of derivative contracts are reported net, pursuant to ASC 815-10-45, in Non-interest-earning assets and Other non-interest-bearing liabilities.
(7)Interest expense on Trading account liabilities of ICG is reported as a reduction of Interest revenue. Interest revenue and Interest expense on cash collateral positions are reported in interest on Trading account assets and Trading account liabilities, respectively.
(8)Net of unearned income. Includes cash-basis loans.
(9)Includes assets from businesses held-for-sale (see Note 2) and Brokerage receivables.
Average Balances and Interest Rates—Liabilities and Equity, and Net Interest Income(1)(2)(3)
Taxable Equivalent Basis
| Quarterly—Liabilities | Average balance | Interest expense | % Average rate | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 3rd Qtr. | 2nd Qtr. | 3rd Qtr. | 3rd Qtr. | 2nd Qtr. | 3rd Qtr. | 3rd Qtr. | 2nd Qtr. | 3rd Qtr. | ||||||||||
| In millions of dollars, except rates | 2023 | 2023 | 2022 | 2023 | 2023 | 2022 | 2023 | 2023 | 2022 | |||||||||
| Deposits | ||||||||||||||||||
| In U.S. offices(4) | $ | 586,909 | $ | 595,476 | $ | 569,903 | $ | 5,390 | $ | 4,983 | $ | 1,743 | 3.64 | % | 3.36 | % | 1.21 | % |
| In offices outside the U.S.(5) | 534,254 | 536,735 | 505,456 | 4,240 | 3,744 | 1,527 | 3.15 | 2.80 | 1.20 | |||||||||
| Total | $ | 1,121,163 | $ | 1,132,211 | $ | 1,075,359 | $ | 9,630 | $ | 8,727 | $ | 3,270 | 3.41 | % | 3.09 | % | 1.21 | % |
| Securities loaned and sold under agreements to repurchase(6) | ||||||||||||||||||
| In U.S. offices | $ | 180,168 | $ | 170,226 | $ | 111,513 | $ | 3,780 | $ | 3,084 | $ | 864 | 8.32 | % | 7.27 | % | 3.07 | % |
| In offices outside the U.S.(5) | 94,955 | 91,921 | 95,677 | 2,310 | 1,869 | 387 | 9.65 | 8.16 | 1.60 | |||||||||
| Total | $ | 275,123 | $ | 262,147 | $ | 207,190 | $ | 6,090 | $ | 4,953 | $ | 1,251 | 8.78 | % | 7.58 | % | 2.40 | % |
| Trading account liabilities(7)(8) | ||||||||||||||||||
| In U.S. offices | $ | 45,168 | $ | 50,429 | $ | 56,447 | $ | 453 | $ | 479 | $ | 255 | 3.98 | % | 3.81 | % | 1.79 | % |
| In offices outside the U.S.(5) | 66,199 | 77,925 | 72,078 | 439 | 391 | 217 | 2.63 | 2.01 | 1.19 | |||||||||
| Total | $ | 111,367 | $ | 128,354 | $ | 128,525 | $ | 892 | $ | 870 | $ | 472 | 3.18 | % | 2.72 | % | 1.46 | % |
| Short-term borrowings and other interest-bearing liabilities(9) | ||||||||||||||||||
| In U.S. offices | $ | 87,040 | $ | 86,990 | $ | 103,375 | $ | 1,737 | $ | 1,608 | $ | 654 | 7.92 | % | 7.41 | % | 2.51 | % |
| In offices outside the U.S.(5) | 30,395 | 39,744 | 50,947 | 219 | 169 | 91 | 2.86 | 1.71 | 0.71 | |||||||||
| Total | $ | 117,435 | $ | 126,734 | $ | 154,322 | $ | 1,956 | $ | 1,777 | $ | 745 | 6.61 | % | 5.62 | % | 1.92 | % |
| Long-term debt(10) | ||||||||||||||||||
| In U.S. offices | $ | 156,065 | $ | 159,803 | $ | 165,834 | $ | 2,389 | $ | 2,367 | $ | 1,572 | 6.07 | % | 5.94 | % | 3.76 | % |
| In offices outside the U.S.(5) | 2,420 | 2,524 | 3,495 | 52 | 53 | 46 | 8.52 | 8.42 | 5.22 | |||||||||
| Total | $ | 158,485 | $ | 162,327 | $ | 169,329 | $ | 2,441 | $ | 2,420 | $ | 1,618 | 6.11 | % | 5.98 | % | 3.79 | % |
| Total interest-bearing liabilities | $ | 1,783,573 | $ | 1,811,773 | $ | 1,734,725 | $ | 21,009 | $ | 18,747 | $ | 7,356 | 4.67 | % | 4.15 | % | 1.68 | % |
| Demand deposits in U.S. offices | $ | 104,930 | $ | 113,639 | $ | 140,271 | ||||||||||||
| Other non-interest-bearing liabilities(7) | 315,523 | 331,119 | 325,283 | |||||||||||||||
| Total liabilities | $ | 2,204,026 | $ | 2,256,531 | $ | 2,200,279 | ||||||||||||
| Citigroup stockholders’ equity | $ | 209,028 | $ | 208,459 | $ | 198,694 | ||||||||||||
| Noncontrolling interests | 725 | 624 | 473 | |||||||||||||||
| Total equity | $ | 209,753 | $ | 209,083 | $ | 199,167 | ||||||||||||
| Total liabilities and stockholders’ equity | $ | 2,413,779 | $ | 2,465,614 | $ | 2,399,446 | ||||||||||||
| Net interest income as a percentage of average interest-earning assets(11) | ||||||||||||||||||
| In U.S. offices | $ | 1,287,260 | $ | 1,336,146 | $ | 1,278,682 | $ | 6,561 | $ | 6,961 | $ | 7,458 | 2.02 | % | 2.09 | % | 2.31 | % |
| In offices outside the U.S.(6) | 918,911 | 915,457 | 891,228 | 7,290 | 6,952 | 5,151 | 3.15 | 3.05 | 2.29 | |||||||||
| Total | $ | 2,206,171 | $ | 2,251,603 | $ | 2,169,910 | $ | 13,851 | $ | 13,913 | $ | 12,609 | 2.49 | % | 2.48 | % | 2.31 | % |
| Nine Months—Liabilities | Average balance | Interest expense | % Average rate | |||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||||
| Nine Months | Nine Months | Nine Months | Nine Months | Nine Months | Nine Months | |||||||||||||
| In millions of dollars, except rates | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | ||||||||||||
| Deposits | ||||||||||||||||||
| In U.S. offices(4) | $ | 595,461 | $ | 561,368 | $ | 14,805 | $ | 2,525 | 3.32 | % | 0.60 | % | ||||||
| In offices outside the U.S.(5) | 538,056 | 513,121 | 11,260 | 3,036 | 2.80 | 0.79 | ||||||||||||
| Total | $ | 1,133,517 | $ | 1,074,489 | $ | 26,065 | $ | 5,561 | 3.07 | % | 0.69 | % | ||||||
| Securities loaned and sold under agreements to repurchase(6) | ||||||||||||||||||
| In U.S. offices | $ | 160,543 | $ | 113,772 | $ | 9,096 | $ | 1,416 | 7.58 | % | 1.66 | % | ||||||
| In offices outside the U.S.(5) | 93,116 | 94,791 | 5,513 | 772 | 7.92 | 1.09 | ||||||||||||
| Total | $ | 253,659 | $ | 208,563 | $ | 14,609 | $ | 2,188 | 7.70 | % | 1.40 | % | ||||||
| Trading account liabilities(7)(8) | ||||||||||||||||||
| In U.S. offices | $ | 49,277 | $ | 52,584 | $ | 1,344 | $ | 315 | 3.65 | % | 0.80 | % | ||||||
| In offices outside the U.S.(5) | 73,750 | 69,965 | 1,205 | 441 | 2.18 | 0.84 | ||||||||||||
| Total | $ | 123,027 | $ | 122,549 | $ | 2,549 | $ | 756 | 2.77 | % | 0.82 | % | ||||||
| Short-term borrowings and other interest bearing liabilities(9) | ||||||||||||||||||
| In U.S. offices | $ | 90,041 | $ | 92,022 | $ | 4,827 | $ | 884 | 7.17 | % | 1.28 | % | ||||||
| In offices outside the U.S.(5) | 39,356 | 57,119 | 555 | 184 | 1.89 | 0.43 | ||||||||||||
| Total | $ | 129,397 | $ | 149,141 | $ | 5,382 | $ | 1,068 | 5.56 | % | 0.96 | % | ||||||
| Long-term debt(10) | ||||||||||||||||||
| In U.S. offices | $ | 161,240 | $ | 165,880 | $ | 7,041 | $ | 3,604 | 5.84 | % | 2.90 | % | ||||||
| In offices outside the U.S.(5) | 2,542 | 3,780 | 157 | 125 | 8.26 | 4.42 | ||||||||||||
| Total | $ | 163,782 | $ | 169,660 | $ | 7,198 | $ | 3,729 | 5.88 | % | 2.94 | % | ||||||
| Total interest-bearing liabilities | $ | 1,803,382 | $ | 1,724,402 | $ | 55,803 | $ | 13,302 | 4.14 | % | 1.03 | % | ||||||
| Demand deposits in U.S. offices | $ | 113,080 | $ | 137,682 | ||||||||||||||
| Other non-interest-bearing liabilities(7) | 323,035 | 322,927 | ||||||||||||||||
| Total liabilities | $ | 2,239,497 | $ | 2,185,011 | ||||||||||||||
| Citigroup stockholders’ equity | $ | 207,071 | $ | 198,945 | ||||||||||||||
| Noncontrolling interests | 644 | 557 | ||||||||||||||||
| Total equity | $ | 207,715 | $ | 199,502 | ||||||||||||||
| Total liabilities and stockholders’ equity | $ | 2,447,212 | $ | 2,384,513 | ||||||||||||||
| Net interest income as a percentage of average interest-earning assets(11) | ||||||||||||||||||
| In U.S. offices | $ | 1,321,446 | $ | 1,257,817 | $ | 20,977 | $ | 21,386 | 2.12 | % | 2.27 | % | ||||||
| In offices outside the U.S.(6) | 915,491 | 903,278 | 20,179 | 14,144 | 2.95 | 2.09 | ||||||||||||
| Total | $ | 2,236,937 | $ | 2,161,095 | $ | 41,156 | $ | 35,530 | 2.46 | % | 2.20 | % |
(1)Interest revenue and Net interest income include the taxable equivalent adjustments discussed in the table above.
(2)Interest rates and amounts include the effects of risk management activities associated with the respective liability categories.
(3)Monthly or quarterly averages have been used by certain subsidiaries where daily averages are unavailable.
(4)Consists of other time deposits and savings deposits. Savings deposits are made up of insured money market accounts, NOW accounts and other savings deposits.
(5)Average rates reflect prevailing local interest rates, including inflationary effects and monetary corrections in certain countries.
(6)Average volumes of securities sold under agreements to repurchase are reported net pursuant to ASC 210-20-45. However, Interest expense excludes the impact of ASC 210-20-45.
(7)The fair value carrying amounts of derivative contracts are reported net, pursuant to ASC 815-10-45, in Non-interest-earning assets and Other non-interest-bearing liabilities.
(8)Interest expense on Trading account liabilities of ICG is reported as a reduction of Interest revenue. Interest revenue and Interest expense on cash collateral positions are reported in interest on Trading account assets and Trading account liabilities, respectively.
(9)Includes Brokerage payables.
(10)Excludes hybrid financial instruments and beneficial interests in consolidated VIEs that are classified as Long-term debt, as the changes in fair value for these obligations are recorded in Principal transactions.
(11)Includes allocations for capital and funding costs based on the location of the asset.
Market Risk of Trading Portfolios
Value at Risk (VAR)
Citi believes its VAR model is conservatively calibrated to incorporate fat-tail scaling and the greater of short-term (approximately the most recent month) and long-term (18 months for commodities and three years for others) market volatility. As of September 30, 2023, Citi estimates that the conservative features of the VAR calibration contribute an approximate 32% add-on to what would be a VAR estimated under the assumption of stable and perfectly, normally distributed markets. As of June 30, 2023, the add-on was 48%.
As presented in the table below, Citi’s average trading VAR for the third quarter of 2023 decreased 13% quarter-over-quarter, primarily from inventory changes in ICG Markets businesses and updates to reflect changes in volatilities.
Quarter-end and Average Trading VAR and Trading and Credit Portfolio VAR
| Third Quarter | Second Quarter | Third Quarter | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| In millions of dollars | September 30, 2023 | 2023 Average | June 30, 2023 | 2023 Average | September 30, 2022 | 2022 Average | ||||||
| Interest rate | $ | 109 | $ | 102 | $ | 109 | $ | 129 | $ | 109 | $ | 113 |
| Credit spread | 80 | 68 | 63 | 69 | 60 | 80 | ||||||
| Covariance adjustment(1) | (59) | (49) | (48) | (49) | (39) | (59) | ||||||
| Fully diversified interest rate and credit spread(2) | $ | 130 | $ | 121 | $ | 124 | $ | 149 | $ | 130 | $ | 134 |
| Foreign exchange | 72 | 36 | 20 | 18 | 14 | 28 | ||||||
| Equity | 27 | 23 | 30 | 22 | 32 | 26 | ||||||
| Commodity | 28 | 28 | 29 | 37 | 36 | 37 | ||||||
| Covariance adjustment(1) | (116) | (89) | (91) | (89) | (92) | (94) | ||||||
| Total trading VAR—all market risk factors, including general and specific risk (excluding credit portfolios)(2) | $ | 141 | $ | 119 | $ | 112 | $ | 137 | $ | 120 | $ | 131 |
| Specific risk-only component(3) | $ | (9) | $ | (9) | $ | (15) | $ | (9) | $ | (2) | $ | — |
| Total trading VAR—general market risk factors only (excluding credit portfolios) | $ | 150 | $ | 128 | $ | 127 | $ | 146 | $ | 122 | $ | 131 |
| Incremental impact of the credit portfolio(4) | $ | 6 | $ | 13 | $ | 33 | $ | 11 | $ | 23 | $ | 28 |
| Total trading and credit portfolio VAR | $ | 147 | $ | 132 | $ | 145 | $ | 148 | $ | 143 | $ | 159 |
(1) Covariance adjustment (also known as diversification benefit) equals the difference between the total VAR and the sum of the VARs tied to each risk type. The benefit reflects the fact that the risks within individual and across risk types are not perfectly correlated and, consequently, the total VAR on a given day will be lower than the sum of the VARs relating to each risk type. The determination of the primary drivers of changes to the covariance adjustment is made by an examination of the impact of both model parameter and position changes.
(2) The total trading VAR includes mark-to-market and certain fair value option trading positions in ICG, with the exception of hedges to the loan portfolio, fair value option loans and all CVA exposures. Available-for-sale and accrual exposures are not included.
(3) The specific risk-only component represents the level of equity and fixed income issuer-specific risk embedded in VAR.
(4) The credit portfolio is composed of mark-to-market positions associated with non-trading business units, with the CVA relating to derivative counterparties and all associated CVA hedges. FVA and DVA are not included. The credit portfolio also includes hedges to the loan portfolio, fair value option loans and hedges to the leveraged finance pipeline within capital markets origination in ICG.
The table below provides the range of market factor VARs associated with Citi’s total trading VAR, inclusive of specific risk:
| Third Quarter | Second Quarter | Third Quarter | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2023 | 2023 | 2022 | ||||||||||
| In millions of dollars | Low | High | Low | High | Low | High | ||||||
| Interest rate | $ | 85 | $ | 119 | $ | 102 | $ | 186 | $ | 91 | $ | 137 |
| Credit spread | 56 | 80 | 57 | 83 | 60 | 99 | ||||||
| Fully diversified interest rate and credit spread | $ | 105 | $ | 138 | $ | 116 | $ | 211 | $ | 118 | $ | 151 |
| Foreign exchange | 12 | 101 | 12 | 24 | 13 | 43 | ||||||
| Equity | 14 | 33 | 15 | 32 | 21 | 33 | ||||||
| Commodity | 22 | 31 | 25 | 47 | 33 | 41 | ||||||
| Total trading | $ | 99 | $ | 150 | $ | 107 | $ | 192 | $ | 113 | $ | 149 |
| Total trading and credit portfolio | 111 | 165 | 118 | 200 | 134 | 173 |
Note: No covariance adjustment can be inferred from the above table as the high and low for each market factor will be from different close-of-business dates.
The following table provides the VAR for ICG, excluding the CVA relating to derivative counterparties, hedges of CVA, fair value option loans and hedges to the loan portfolio:
| In millions of dollars | September 30, 2023 | |
|---|---|---|
| Total—all market risk factors, including <br>general and specific risk | ||
| Average—during quarter | $ | 117 |
| High—during quarter | 148 | |
| Low—during quarter | 95 |
Regulatory VAR Back-testing
In accordance with Basel III, Citi is required to perform back-testing to evaluate the effectiveness of its Regulatory VAR model. Regulatory VAR back-testing is the process in which the daily one-day VAR, at a 99% confidence interval, is compared to the buy-and-hold profit and loss (i.e., the profit and loss impact if the portfolio is held constant at the end of the day and re-priced the following day). Buy-and-hold profit and loss represents the daily mark-to-market profit and loss attributable to price movements in covered positions from the close of the previous business day. Buy-and-hold profit and loss excludes realized trading revenue, net interest, fees and commissions, intra-day trading profit and loss and changes in reserves.
Based on a 99% confidence level, Citi would expect two to three days in any one year where buy-and-hold losses exceed the Regulatory VAR. Given the conservative calibration of Citi’s VAR model (as a result of taking the greater of short- and long-term volatilities and fat-tail scaling of volatilities), Citi would expect fewer exceptions under normal and stable market conditions. Periods of unstable market conditions could increase the number of back-testing exceptions.
As of September 30, 2023, there were two back-testing exceptions observed for Citi’s Regulatory VAR in the last 12 months.
OTHER RISKS
For additional information regarding other risks, including Citi’s management of other risks, see “Managing Global Risk—Other Risks” in Citi’s 2022 Form 10-K.
Country Risk
Top 25 Country Exposures
The following table presents Citi’s top 25 exposures by country (excluding the U.S.) as of September 30, 2023. (Including the U.S., Citi’s top 25 exposures by country would represent approximately 98% of Citi’s exposure to all countries as of September 30, 2023.)
For purposes of the table, loan amounts are reflected in the country where the loan is booked, which is generally based on the domicile of the borrower. For example, a loan to a Chinese subsidiary of a Switzerland-based corporation will generally be categorized as a loan in China. In addition, Citi has developed regional booking centers in certain countries,
most significantly in the United Kingdom (U.K.) and Ireland, in order to more efficiently serve its corporate customers. As an example, with respect to the U.K., only 39% of corporate loans presented in the table below are to U.K. domiciled entities (39% for unfunded commitments), with the balance of the loans predominately to European domiciled counterparties. Approximately 89% of the total U.K. funded loans and 90% of the total U.K. unfunded commitments were investment grade as of September 30, 2023.
Trading account assets and investment securities are generally categorized based on the domicile of the issuer of the security of the underlying reference entity. For additional information on the assets included in the table, see the footnotes to the table below.
| In billions of dollars | ICG <br>loans | PBWM loans(1) | Legacy Franchises loans | Loans transferred to HFS(7) | Other funded(2) | Unfunded(3) | Net MTM on derivatives/repos(4) | Total hedges (on loans and CVA) | Investment securities(5) | Trading account assets(6) | Total<br><br>as of<br><br>3Q23 | Total<br><br>as of<br><br>2Q23 | Total<br><br>as of<br><br>3Q22 | Total<br><br>as a %<br><br>of Citi<br><br>as of<br><br>3Q23 | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| United Kingdom | $ | 35.9 | $ | 5.1 | $ | — | $ | — | $ | 1.4 | $ | 41.9 | $ | 11.4 | $ | (4.5) | $ | 3.6 | $ | 2.4 | $ | 97.2 | $ | 97.6 | $ | 93.0 | 5.6 | % |
| Mexico | 9.7 | 0.1 | 25.9 | — | 0.3 | 9.2 | 3.1 | (3.4) | 23.0 | 1.3 | 69.2 | 68.9 | 56.3 | 4.0 | ||||||||||||||
| Ireland | 14.4 | — | — | — | 0.9 | 33.0 | 0.2 | (0.2) | — | 0.7 | 49.0 | 49.9 | 50.3 | 2.8 | ||||||||||||||
| Hong Kong | 8.7 | 20.0 | — | — | 0.2 | 5.0 | 2.1 | (0.5) | 8.6 | 0.1 | 44.2 | 46.0 | 50.2 | 2.5 | ||||||||||||||
| Singapore | 9.0 | 17.8 | — | — | 0.4 | 7.2 | 1.0 | (0.5) | 5.9 | 1.5 | 42.3 | 43.9 | 44.5 | 2.4 | ||||||||||||||
| Brazil | 13.0 | — | — | — | — | 2.8 | 7.9 | (1.1) | 7.3 | 2.9 | 32.8 | 31.0 | 29.8 | 1.9 | ||||||||||||||
| India | 7.2 | — | — | — | 0.6 | 3.9 | 0.9 | (0.6) | 9.0 | 1.3 | 22.3 | 23.6 | 25.6 | 1.3 | ||||||||||||||
| South Korea | 3.7 | — | 5.7 | — | 0.1 | 1.4 | 0.8 | (0.7) | 9.0 | 0.9 | 20.9 | 22.4 | 22.8 | 1.2 | ||||||||||||||
| China | 5.8 | — | 0.8 | — | 0.6 | 1.2 | 1.9 | (1.2) | 7.9 | 1.6 | 18.6 | 18.2 | 19.1 | 1.1 | ||||||||||||||
| Germany | 0.4 | — | — | — | 0.3 | 6.7 | 7.9 | (3.8) | 7.9 | (2.1) | 17.3 | 18.8 | 20.4 | 1.0 | ||||||||||||||
| Canada | 1.7 | 1.5 | — | — | 0.1 | 7.2 | 2.1 | (2.0) | 3.1 | 2.8 | 16.5 | 16.4 | 15.8 | 0.9 | ||||||||||||||
| Australia | 8.4 | 0.4 | — | — | — | 6.3 | 0.8 | (1.4) | 0.6 | 1.4 | 16.5 | 15.7 | 14.5 | 0.9 | ||||||||||||||
| United Arab Emirates | 6.3 | 1.5 | — | — | 0.1 | 4.8 | 0.3 | (0.3) | 3.7 | — | 16.4 | 16.2 | 15.8 | 0.9 | ||||||||||||||
| Japan | 1.5 | — | — | — | — | 3.6 | 5.3 | (1.9) | 4.5 | 2.9 | 15.9 | 13.2 | 17.9 | 0.9 | ||||||||||||||
| Poland | 2.9 | — | 1.4 | — | — | 2.8 | 0.9 | (0.2) | 5.1 | 0.1 | 13.0 | 14.1 | 12.5 | 0.7 | ||||||||||||||
| Jersey | 2.6 | 2.7 | — | — | — | 6.9 | — | (0.1) | — | — | 12.1 | 11.5 | 16.1 | 0.7 | ||||||||||||||
| Indonesia | 2.1 | — | — | 0.6 | — | 1.0 | 1.4 | (0.1) | 1.0 | 0.1 | 6.1 | 6.4 | 5.6 | 0.3 | ||||||||||||||
| Taiwan | 4.0 | — | — | — | — | 0.8 | 0.5 | (0.1) | 0.3 | (0.1) | 5.4 | 14.0 | 14.4 | 0.3 | ||||||||||||||
| Malaysia | 1.1 | — | — | — | 0.1 | 0.8 | 0.1 | (0.1) | 3.1 | 0.2 | 5.3 | 4.9 | 8.0 | 0.3 | ||||||||||||||
| Philippines | 0.6 | — | — | — | 0.1 | 0.2 | 2.4 | (0.2) | 2.2 | (0.1) | 5.2 | 5.2 | 5.3 | 0.3 | ||||||||||||||
| Luxembourg | 0.2 | 0.8 | — | — | — | 0.1 | 0.4 | (0.3) | 3.6 | 0.1 | 4.9 | 5.2 | 4.4 | 0.3 | ||||||||||||||
| South Africa | 1.5 | — | — | — | — | 0.7 | 0.1 | (0.2) | 2.2 | 0.3 | 4.6 | 4.5 | 4.3 | 0.3 | ||||||||||||||
| Czech Republic | 0.8 | — | — | — | — | 0.8 | 2.1 | — | 0.7 | 0.1 | 4.5 | 5.2 | 3.2 | 0.3 | ||||||||||||||
| Chile | 1.0 | — | — | — | 2.2 | 0.1 | 0.2 | — | — | — | 3.5 | 3.8 | 3.2 | 0.2 | ||||||||||||||
| Italy | 0.4 | — | — | — | — | 1.7 | 1.3 | (1.8) | — | 1.9 | 3.5 | 5.2 | 3.9 | 0.2 | ||||||||||||||
| Total as a % of Citi’s total exposure | 31.3 | % | ||||||||||||||||||||||||||
| Total as a % of Citi’s non-U.S. total exposure | 90.1 | % |
(1) PBWM loans reflect funded loans, including those related to the Private bank, net of unearned income. As of September 30, 2023, Private bank loans in the table above totaled $19.3 billion, concentrated in Singapore ($5.1 billion), the U.K. ($5.0 billion) and Hong Kong ($4.3 billion).
(2) Other funded includes other direct exposures such as accounts receivable and investments accounted for under the equity method.
(3) Unfunded exposure includes unfunded corporate lending commitments, letters of credit and other contingencies.
(4) Net mark-to-market (MTM) counterparty risk on OTC derivatives and securities lending/borrowing transactions (repos). Exposures are shown net of collateral and inclusive of CVA. Also includes margin loans.
(5) Investment securities include debt securities AFS, recorded at fair market value, and debt securities HTM, recorded at amortized cost.
(6) Trading account assets are shown on a net basis and include issuer risk on cash products and derivative exposure where the underlying reference entity/issuer is located in that country.
(7) September 30, 2023, June 30, 2023 and September 30, 2022 include Legacy Franchises loans reclassified to HFS as a result of Citi’s agreement to sell its consumer banking business in each applicable country. For additional information, see “Legacy Franchises” above and Note 2.
Russia
Introduction
In Russia, Citi’s remaining operations are conducted through both ICG and Legacy Franchises.
As part of previously disclosed plans, Citi has ended nearly all of the institutional banking services it offered in Russia, with the remaining services only those necessary to fulfill its remaining legal and regulatory obligations. In addition, Citi has significantly reduced its Legacy Franchises loan portfolio in Russia since September 2022, largely due to loan portfolio sales and its entry into a credit card referral agreement with a Russian bank. Citi has ceased soliciting any new business or new clients in Russia. Citi will continue to manage its existing legal and regulatory commitments and obligations, as well as support its employees, during this period. For additional information, see “Citi’s Wind-Down of Its Russia Operations” below.
Citi continues to monitor the war in Ukraine, related sanctions and economic conditions and continues to mitigate its Russia exposures and risks as appropriate.
For additional information about Citi’s risks related to its Russia exposures, see “Forward-Looking Statements” below and “Risk Factors—Market-Related Risk,” “—Operational Risks” and “—Other Risks” in Citi’s 2022 Form 10-K.
Impact of Russia’s Invasion of Ukraine on Citi’s Businesses
Russia-related Balance Sheet Exposures
Citi’s remaining domestic operations in Russia are conducted through a subsidiary of Citibank, AO Citibank, which uses the Russian ruble as its functional currency.
The following table summarizes Citi’s exposures related to its Russia operations:
| In billions of U.S. dollars | September 30, 2023 | June 30, 2023 | September 30, 2022 | Change 3Q23 vs. 2Q23 | ||||
|---|---|---|---|---|---|---|---|---|
| Loans | $ | 0.2 | $ | 0.3 | $ | 1.6 | $ | (0.1) |
| Investment securities(1) | 0.4 | 0.6 | 1.4 | (0.2) | ||||
| Net MTM on derivatives/repos(2) | 1.2 | 2.0 | 1.4 | (0.8) | ||||
| Total hedges (on loans and CVA) | (0.1) | (0.1) | (0.1) | — | ||||
| Unfunded(3) | — | — | 0.2 | — | ||||
| Trading accounts assets | — | — | 0.1 | — | ||||
| Country risk exposure | $ | 1.7 | $ | 2.8 | $ | 4.6 | $ | (1.1) |
| Cash on deposit and placements(4) | 0.6 | 0.9 | 3.0 | (0.3) | ||||
| Deposit Insurance Agency(5) | 3.5 | 2.8 | — | 0.7 | ||||
| Total third-party exposure(6) | $ | 5.8 | $ | 6.5 | $ | 7.6 | $ | (0.7) |
| Additional exposures to Russian counterparties that are not held by<br><br>the Russian subsidiary | 0.1 | 0.1 | 0.3 | — | ||||
| Total Russia exposure(7) | $ | 5.9 | $ | 6.6 | $ | 7.9 | $ | (0.7) |
(1) Investment securities include debt securities AFS, recorded at fair market value, primarily local government debt securities.
(2) Reverse repurchase agreements are shown gross of collateral and are included in net MTM on derivatives/repos in the table above, as netting of collateral for Russia-related reverse repurchase agreements was removed in the second quarter of 2022. This removal was due to the inability to conclude, with a well-founded basis, the enforceability of contractual rights in the Russian legal system in the event of a counterparty default, given the geopolitical uncertainty caused by the war in Ukraine.
(3) Unfunded exposure consists of unfunded corporate lending commitments, letters of credit and other contingencies.
(4) Cash on deposit and placements are primarily with the Central Bank of Russia and foreign financial institutions.
(5) Represents dividends received by Citi in its role as custodian for investor clients in Russia, which Citi is required by local regulation to hold at the Deposit Insurance Agency. Citi is unable to remit these funds to clients due to restrictions imposed by the Russian government.
(6) The majority of AO Citibank’s third-party exposures was funded with the dividends under footnote 5 and domestic deposit liabilities from both corporate and personal banking clients.
(7) Citigroup’s CTA loss included in its AOCI related to its indirect subsidiary, AO Citibank, is excluded from the above table, because the CTA loss is not held in AO Citibank and would be recognized in Citigroup’s earnings only upon either the substantial liquidation or a loss of control of AO Citibank. Citi has separately described these risks in “Deconsolidation Risk” below.
During the third quarter of 2023, Citi’s Russia-related exposures decreased by $0.7 billion, as shown in the table above. The decrease in exposure was driven by a $0.7 billion depreciation of the ruble against the U.S. dollar. During the period, inflows from dividends received from Russian corporations on behalf of Citi’s clients were fully offset by deposit outflows and tax payments to local authorities. Approximately 68% of Citi’s remaining exposures in Russia are trapped dividends that Citi cannot remit to its clients due to restrictions imposed by the Russian government, of which $3.5 billion is held with the Deposit Insurance Agency as of September 30, 2023.
Citi’s net investment in Russia was approximately $1.0 billion as of September 30, 2023 (down slightly from $1.1 billion as of June 30, 2023). Citi hedges its ruble/USD spot FX exposure in AOCI through the purchase of FX derivatives. The ongoing mark-to-market of the hedging derivatives is also reported in AOCI. When the ruble depreciates against the USD, the USD equivalent value of Citigroup’s investment in AO Citibank also declines. This change in value is offset by the change in value of the hedging instrument (FX derivative). Going forward, Citi may record devaluations on its net ruble-denominated assets in earnings, without the benefit from a change in the fair value of derivative positions used to economically hedge the exposures.
Earnings and Other Impacts on Citi’s Businesses
Citi’s ICG, PBWM and Legacy Franchises segments and Corporate/Other have been impacted by various macroeconomic factors and volatilities, including Russia’s invasion of Ukraine and its direct and indirect impact on the European and global economies. For a broader discussion of these factors and volatilities on Citi’s businesses, see “Executive Summary” and each business’s results of operations above.
As of September 30, 2023, Citigroup’s ACL included a $0.1 billion remaining credit reserve for Citi’s direct Russian counterparties (compared to $0.2 billion at June 30, 2023).
Citi’s Wind-Down of Its Russia Operations
In August 2022, Citi disclosed its decision to wind down its Russia consumer, local commercial and institutional banking businesses, including actively pursuing portfolio sales. In connection with this wind-down, Citi has incurred approximately $55 million to-date in charges, largely from restructuring, vendor termination fees and other related charges. Citi expects to incur an additional approximate $85 million in estimated charges (approximately $10 million in ICG and $65 million in Legacy Franchises, and $10 million in Corporate/Other excluding the impact from any portfolio sales). This estimate was revised down during the third quarter from $180 million at June 30, 2023. During the third quarter, as part of the previously disclosed cards referral agreement with a Russian bank, approximately $26 million of credit card receivables was settled upon referral and refinanced. For additional information about Citi’s continued efforts to reduce its operations and exposure in Russia, see Note 2 and “Risk Factors” and “Managing Global Risk—Other Risks—Country Risk—Russia” in Citi’s 2022 Form 10-K.
Deconsolidation Risk
Citi’s remaining operations in Russia subject it to various risks, including, among others, foreign currency volatility, including appreciation or devaluation; restrictions arising from retaliatory Russian laws and regulations on the conduct of its business; sanctions or asset freezes; or other deconsolidation events (for additional information, see “Risk Factors—Other Risks” in Citi’s 2022 Form 10-K). Examples of triggers that may result in deconsolidation of AO Citibank include voluntary or forced sale of ownership or loss of control due to actions of relevant governmental authorities, including expropriation (i.e., the entity becomes subject to the complete control of a government, court, administrator, trustee or regulator); revocation of banking license; and loss of ability to elect a board of directors or appoint members of senior management. As of September 30, 2023, Citi continued to consolidate AO Citibank because none of the deconsolidation factors were triggered.
In the event Citi deems there is a loss of control, for example, through expropriation of AO Citibank Russia, Citi’s foreign entity in Russia, Citi would be required to (i) write off the net investment of approximately $1.0 billion (down slightly from $1.1 billion as of June 30, 2023), (ii) recognize a CTA loss of approximately $1.6 billion (compared to $1.6 billion as of June 30, 2023) through earnings and (iii) recognize a loss of $0.6 billion (compared to $0.4 billion as of June 30, 2023) on intercompany liabilities owed by AO Citibank to other Citi entities outside Russia. In the sole event of a substantial liquidation, as opposed to a loss of control, Citi would be required to recognize the CTA loss of approximately $1.6 billion through earnings and would evaluate its remaining net investment as circumstances evolve.
Citi as Paying Agent for Russia-related Clients
Citi serves or served as paying agent on bonds issued by various entities in Russia, including Russian corporate clients. Citi’s role as paying agent is administrative. In this role, Citi acts as an agent of its client, the bond issuer, receiving interest and principal payments from the bond issuer and then making payments to international central securities depositories (e.g., Depository Trust Company, Euroclear, Clearstream). The international central securities depositories (ICSDs) make payments to those participants or account holders (e.g., broker/dealers) that have clients who are investors in the applicable bonds (i.e., bondholders). As a paying agent, Citi generally does not have information about the identity of the bondholders. Citi may be exposed to risks due to its responsibilities for receiving and processing payments on behalf of its clients as a result of sanctions or other governmental requirements and prohibitions. To mitigate operational and sanctions risks, Citi has established policies, procedures and controls for client relationships and payment processing to help ensure compliance with U.S., U.K., EU and other jurisdictions’ sanctions laws.
These processes may require Citi to delay or withhold the processing of payments as a result of sanctions on the bond issuer. Citi is also prevented from making payments to accounts on behalf of bondholders should the ICSDs disclose to Citi the presence of sanctioned bondholders. In both instances, Citi is generally required to segregate, restrict or
block the funds until applicable sanctions are lifted or the payment is otherwise authorized under applicable law.
Reputational Risks
Citi has continued its efforts to enhance and protect its reputation with its colleagues, clients, customers, investors, regulators and the public. Citi’s response to the war in Ukraine, including any action or inaction, may have a negative impact on Citi’s reputation with some or all of these parties.
For example, Citi is exposed to reputational risk as a result of its current presence in Russia and association with Russian individuals or entities, whether subject to sanctions or not, including Citi’s inability to support its global clients in Russia, which could adversely affect its broader client relationships and businesses; current involvement in transactions or supporting activities involving Russian assets or interests; failure to correctly interpret and apply laws and regulations, including those related to sanctions; perceived misalignment of Citi’s actions to its stated strategy in Russia; and the reputational impact from Citi’s activity and engagement with Ukraine or with non-Russian clients exiting their Russia businesses. Citi has considered the potential for reputation risk and taken actions to mitigate such risks. Citi established a Russia Special Review Process with management’s Reputation Risk Committee with oversight for significant Russia-related reputation risks and completed a number of reputation risk reviews of matters with a Russian nexus.
While Citi announced its intention to wind down its businesses in Russia, Citi will continue to manage those operations during the wind-down process and will be required to maintain certain limited operations to fulfill its remaining legal and regulatory obligations. Also, sanctions and sanctions compliance are highly complex and may change over time and result in increased operational risk. Failure to fully comply with relevant sanctions or the application of sanctions where they should not be applied may negatively impact Citi’s reputation. In addition, Citi currently performs services for, conducts business with or deals in non-sanctioned Russian-owned businesses and Russian assets. This has attracted, and will likely continue to attract, negative attention, despite the previously disclosed plan to wind down nearly all its activities in the country, cessation of new business and client originations, and reduction of other exposures.
Citi’s continued presence or divestiture of businesses in Russia could also increase its susceptibility to cyberattacks that could negatively impact its relationships with clients and customers, harm its reputation, increase its compliance costs and adversely affect its business operations and results of operations. For additional information on operational and cyber risks, see “Risk Factors—Operational Risk” in Citi’s 2022 Form 10-K.
Board’s Role in Overseeing Related Risks
The Citi Board of Directors (Board) and the Board’s Risk Management Committee (RMC) and its other Committees have received and continue to receive regular reports from senior management regarding the war in Ukraine and its impact on Citi’s operations in Russia, Ukraine and elsewhere, as well as the war’s broader geopolitical, macroeconomic and reputational impacts. In addition to receiving regular briefings from management, the full Board has routinely been invited to attend portions of the RMC meetings for discussions related to the war in Ukraine, including with respect to Citi’s risk exposures and stress testing. The reports to the Board and its Committees from senior management who represent the impacted businesses and the EMEA region, Independent Risk Management, Finance, Independent Compliance Risk Management, including those individuals responsible for sanctions compliance, and Human Resources, have included detailed information regarding financial impacts, impacts on capital, cybersecurity, strategic considerations, sanctions compliance, employee assistance and reputational risks, enabling the Board and its Committees to properly exercise their oversight responsibilities. In addition, senior management has also provided updates to Citi’s Executive Management Team and the Board, outside of formal meetings, regarding Citi’s Russia-related risks, including with respect to cybersecurity matters.
Ukraine
Citi has continued to operate in Ukraine throughout the war through its ICG businesses, serving the local subsidiaries of multinationals, along with local financial institutions and the public sector. Citi employs approximately 230 people in Ukraine and their safety is Citi’s top priority. All of Citi’s domestic operations in Ukraine are conducted through a subsidiary of Citibank, which uses the Ukrainian hryvnia as its functional currency. Citi’s exposures in Ukraine are not significant enough to be included in the “Top 25 Country Exposures” table above. As of September 30, 2023, Citi had $1.5 billion of direct exposures related to Ukraine, compared to $1.3 billion as of June 30, 2023. The increase in exposures reflected a $0.2 billion increase in deposits.
Argentina
Citi operates in Argentina through its ICG businesses. As of September 30, 2023, Citi’s net investment in its Argentine operations was approximately $1.9 billion (unchanged from June 30, 2023). Under U.S. GAAP, Citi uses the U.S. dollar as the functional currency for its operations in countries such as Argentina that are deemed highly inflationary. Citi therefore records the impact of exchange rate fluctuations on its net Argentine peso (ARS)–denominated assets directly in earnings. Accordingly, Citi seeks to reduce its overall ARS exposure in Argentina while complying with local capital and currency exposure limitations.
From Citi’s total net investment in Argentina of approximately $1.9 billion, as of September 30, 2023, Citi’s net ARS exposure was approximately $1.3 billion (compared to $1.6 billion at June 30, 2023). The net ARS exposure has decreased as a result of Citi purchasing an additional approximate $200 million of certain local government bonds during the third quarter (for a total of $500 million in these bonds). These bonds are indexed to the higher of the U.S. dollar (USD) exchange rate or the local inflation index. Citi also originated approximately $50 million of USD-denominated loans during the third quarter. Such bonds and USD-denominated loans may reduce the impact to Citi of a potential currency devaluation in the future, although it remains unclear how effective Citi’s strategies to reduce its ARS exposure may be.
As previously disclosed, the Central Bank of Argentina has continued to maintain certain capital and currency controls that generally restrict Citi’s ability to access U.S. dollars in Argentina and remit earnings from its Argentine operations. As a result, Citi’s net investment in its Argentine operations is likely to continue to increase as Citi generates net income in its Argentine franchise and its earnings cannot be remitted. Due to the currency controls implemented by the Central Bank of Argentina, certain indirect foreign exchange mechanisms have developed that some Argentine entities may use to obtain U.S. dollars, generally at rates that are significantly higher than Argentina’s official exchange rate. Citibank Argentina is precluded from accessing these alternative mechanisms, and these exchange mechanisms cannot be used to remeasure Citi’s net monetary assets into the U.S. dollar under U.S. GAAP. Citibank Argentina therefore uses Argentina’s official market exchange rate to remeasure its net ARS assets into the U.S. dollar, which was 350.0 ARS to 1 U.S. dollar as of September 30, 2023. During the third quarter, the Central Bank of Argentina devalued the official exchange rate by 27%, resulting in an approximate $180 million net negative impact to Citi’s net investment in the country. For additional information on this impact to Citi, see “Executive Summary” and “Institutional Clients Group” above.
If Argentina’s official exchange rate further converges with the approximate rate implied by the indirect foreign exchange mechanisms, Citi could incur a significant loss on its capital in Argentina. Current macroeconomic conditions in the country, along with sustained high inflation, low international reserves held by the Central Bank of Argentina and the foreign currency policy decisions following the upcoming general presidential elections in Argentina, may result in an accelerated or steep depreciation of the official exchange rate in the near term. Citi cannot predict future fluctuations in Argentina’s official market exchange rate or to what extent Citi may be able to access U.S. dollars at the official exchange rate in the future.
Citi may economically hedge foreign currency risk in its net ARS-denominated assets to the extent possible and prudent using non-deliverable forward (NDF) derivative instruments that are primarily executed outside of Argentina. As of September 30, 2023, the international NDF market had very limited liquidity, resulting in Citi’s inability to economically hedge substantially all of its ARS exposure. Accordingly, and to the extent that Citi does not execute NDF contracts for this unhedged exposure in the future, Citi would record devaluations on its net ARS-denominated assets in earnings, without any benefit from a change in the fair value of derivative positions used to economically hedge the exposure.
Citi continually evaluates its economic exposure to its Argentine counterparties and reserves for changes in credit risk and records mark-to-market adjustments for relevant market risks associated with its Argentine assets. Citi believes it has established an appropriate ACL on its Argentine loans, and appropriate fair value adjustments on Argentine assets and liabilities measured at fair value, for credit and sovereign risks under U.S. GAAP as of September 30, 2023. However, Citi may need to record additional reserves in the future, resulting in higher ICG cost of credit, should there be an increase in transfer risk associated with its Argentine exposures. For additional information on Citi’s emerging markets risks, including those related to its Argentine exposures, see “Risk Factors—Strategic Risks” in Citi’s 2022 Form 10-K.
SIGNIFICANT ACCOUNTING POLICIES AND SIGNIFICANT ESTIMATES
This section contains a summary of Citi’s most significant accounting policies. Note 1 to the Consolidated Financial Statements in Citi’s 2022 Form 10-K contains a summary of all of Citigroup’s significant accounting policies. These policies, as well as estimates made by management, are integral to the presentation of Citi’s results of operations and financial condition. While all of these policies require a certain level of management judgment and estimates, this section highlights and discusses the significant accounting policies that require management to make highly difficult, complex or subjective judgments and estimates at times regarding matters that are inherently uncertain and susceptible to change (see also “Risk Factors—Operational Risks” in Citi’s 2022 Form 10-K). Management has discussed each of these significant accounting policies, the related estimates and its judgments with the Audit Committee of the Citigroup Board of Directors.
Valuations of Financial Instruments
Citigroup holds debt and equity securities, derivatives, retained interests in securitizations, investments in private equity and other financial instruments. A portion of these assets and liabilities is reflected at fair value on Citi’s Consolidated Balance Sheet as Trading account assets, Available-for-sale securities and Trading account liabilities.
Citi purchases securities under agreements to resell (reverse repos or resale agreements) and sells securities under agreements to repurchase (repos), a substantial portion of which is carried at fair value. In addition, certain loans, short-term borrowings, long-term debt and deposits, as well as certain securities borrowed and loaned positions that are collateralized with cash, are carried at fair value. Citigroup holds its investments, trading assets and liabilities, and resale and repurchase agreements on Citi’s Consolidated Balance Sheet to meet customer needs and to manage liquidity needs, interest rate risks and private equity investing.
When available, Citi generally uses quoted market prices to determine fair value and classifies such items within Level 1 of the fair value hierarchy established under ASC 820-10, Fair Value Measurement. If quoted market prices are not available, fair value is based on internally developed valuation models that use, where possible, current market-based or independently sourced market parameters, such as interest rates, currency rates and option volatilities. Such models are often based on a discounted cash flow analysis. In addition, items valued using such internally generated valuation techniques are classified according to the lowest level input or value driver that is significant to the valuation. Thus, an item may be classified under the fair value hierarchy as Level 3 even though there may be some significant inputs that are readily observable.
Citi is required to exercise subjective judgments relating to the applicability and functionality of internal valuation models, the significance of inputs or value drivers to the valuation of an instrument and the degree of illiquidity and subsequent lack of observability in certain markets. The fair value of these instruments is reported on Citi’s Consolidated Balance Sheet with the changes in fair value recognized in either the Consolidated Statement of Income or in AOCI.
Losses on available-for-sale securities whose fair values are less than the amortized cost, where Citi intends to sell the security or could more-likely-than-not be required to sell the security prior to recovery, are recognized in earnings. Where Citi does not intend to sell the security nor could more-likely-than-not be required to sell the security, any portion of the loss that is attributable to credit is recognized as an allowance for credit losses with a corresponding provision for credit losses, and the remainder of the loss is recognized in AOCI. Such losses are capped at the difference between the fair value and amortized cost of the security.
For equity securities carried at cost or under the measurement alternative, decreases in fair value below the carrying value are recognized as impairment in the Consolidated Statement of Income. Moreover, for certain equity method investments, decreases in fair value are only recognized in earnings in the Consolidated Statement of Income if such decreases are judged to be an other-than-temporary impairment (OTTI). Assessing if the fair value impairment is temporary is also inherently judgmental.
The fair value of financial instruments incorporates the effects of Citi’s own credit risk and the market view of counterparty credit risk, the quantification of which is also complex and judgmental. For additional information on Citi’s fair value analysis, see Notes 6, 22 and 23 in this Form 10-Q and Note 1 to the Consolidated Financial Statements in Citi’s 2022 Form 10-K.
Citi’s Allowance for Credit Losses (ACL)
The table below presents Citi’s allowance for credit losses on loans (ACLL) and total ACL as of the third quarter of 2023. For information on the drivers of Citi’s ACL build in the third quarter of 2023, see “3Q23 Changes in the ACL” below. For additional information on Citi’s accounting policy on accounting for credit losses under ASC Topic 326, Financial Instruments—Credit Losses; Current Expected Credit Losses (CECL), see Note 1 to the Consolidated Financial Statements in Citi’s 2022 Form 10-K.
| ACL | ||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| In millions of dollars | Balance Dec. 31, 2022 | 1Q23<br>build<br>(release) | 1Q23<br><br>FX/<br><br>Other(1)(4) | Balance Mar. 31, 2023 | 2Q23<br>build<br>(release) | 2Q23 <br>FX/<br>Other | Balance Jun. 30, 2023 | 3Q23 build (release) | 3Q23 FX/Other | Balance Sept. 30, 2023 | ACLL/EOP loans Sept. 30, 2023(2) | |||||||||||
| ICG | $ | 2,715 | $ | (75) | $ | 3 | $ | 2,643 | $ | (150) | $ | (3) | $ | 2,490 | $ | 101 | $ | (13) | $ | 2,578 | ||
| Legacy Franchises corporate (Mexico SBMM) | 140 | (10) | 7 | 137 | (2) | 5 | 140 | 1 | (2) | 139 | ||||||||||||
| Total corporate ACLL | $ | 2,855 | $ | (85) | $ | 10 | $ | 2,780 | $ | (152) | $ | 2 | $ | 2,630 | $ | 102 | $ | (15) | $ | 2,717 | 0.97 | % |
| U.S. Cards(2) | $ | 11,393 | $ | 536 | $ | (173) | $ | 11,756 | $ | 276 | $ | (1) | $ | 12,031 | $ | 128 | $ | 1 | $ | 12,160 | 7.81 | % |
| Retail banking and Global Wealth | 1,330 | (29) | (60) | 1,241 | 57 | 1 | 1,299 | (33) | (1) | 1,265 | ||||||||||||
| Total PBWM | $ | 12,723 | $ | 507 | $ | (233) | $ | 12,997 | $ | 333 | $ | — | $ | 13,330 | $ | 95 | $ | — | $ | 13,425 | ||
| Legacy Franchises consumer | 1,396 | 13 | (17) | 1,392 | 76 | 68 | 1,536 | (18) | (31) | 1,487 | ||||||||||||
| Total consumer ACLL | $ | 14,119 | $ | 520 | $ | (250) | $ | 14,389 | $ | 409 | $ | 68 | $ | 14,866 | $ | 77 | $ | (31) | $ | 14,912 | 3.95 | % |
| Total ACLL | $ | 16,974 | $ | 435 | $ | (240) | $ | 17,169 | $ | 257 | $ | 70 | $ | 17,496 | $ | 179 | $ | (46) | $ | 17,629 | 2.68 | % |
| Allowance for credit losses on unfunded lending commitments (ACLUC) | $ | 2,151 | $ | (194) | $ | 2 | $ | 1,959 | $ | (96) | $ | (1) | $ | 1,862 | $ | (54) | $ | (2) | $ | 1,806 | ||
| Other(3) | 243 | 408 | (19) | 632 | 145 | (19) | 758 | 53 | (18) | 793 | ||||||||||||
| Total ACL | $ | 19,368 | $ | 649 | $ | (257) | $ | 19,760 | $ | 306 | $ | 50 | $ | 20,116 | $ | 178 | $ | (66) | $ | 20,228 |
(1) Includes reclassifications to Other assets related to Citi’s agreements to sell certain of its consumer banking businesses. See Notes 2 and 14.
(2) As of September 30, 2023, in U.S. Personal Banking, Branded cards ACLL/EOP loans was 6.3% and Retail services ACLL/EOP loans was 11.0%.
(3) Includes ACL on Other assets and Held-to-maturity debt securities.
(4) Includes a decrease of $352 million from the adoption of ASU 2022-02 related to the recognition and measurement of TDRs under the modified retrospective approach related to PBWM and Legacy Franchises consumer loans as of January 1, 2023. See Notes 1 and 14.
Citi’s reserves for expected credit losses on funded loans and for unfunded lending commitments, standby letters of credit and financial guarantees are reflected on the Consolidated Balance Sheet in the Allowance for credit losses on loans (ACLL) and Other liabilities (for Allowance for credit losses on unfunded lending commitments (ACLUC)), respectively. In addition, Citi’s reserves for expected credit losses on other financial assets carried at amortized cost, including held-to-maturity securities, reverse repurchase agreements, securities borrowed, deposits with banks and
other financial receivables are reflected in Other assets. These reserves, together with the ACLL and ACLUC, are referred to as the ACL. Changes in the ACL are reflected as Provision for credit losses in the Consolidated Statement of Income for each reporting period. Citi’s ability to estimate expected credit losses over the reasonable and supportable (R&S) period is based on the ability to forecast economic activity over an R&S timeframe. The R&S forecast period for consumer and corporate credit exposures is eight quarters.
The ACL is composed of quantitative and qualitative management adjustment components. The quantitative component uses three forward-looking macroeconomic forecast scenarios—base, upside and downside. The qualitative management adjustment component reflects risks and certain economic conditions not fully captured in the quantitative component. Both the quantitative and qualitative components are further discussed below.
Quantitative Component
Citi estimates expected credit losses for its quantitative component using (i) its comprehensive internal data on loss and default history, (ii) internal credit risk ratings, (iii) external credit bureau and rating agencies information and (iv) R&S forecasts of macroeconomic conditions.
For its consumer and corporate portfolios, Citi’s expected credit losses are determined primarily by utilizing models that consider the borrowers’ probability of default (PD), loss given default (LGD) and exposure at default (EAD). The loss likelihood and severity models used for estimating expected credit losses are sensitive to changes in macroeconomic variables, including housing prices, unemployment rate and real GDP, and cover a wide range of geographic, industry, product and business segments.
In addition, Citi’s models determine expected credit losses based on leading credit indicators, including loan delinquencies, changes in portfolio size, default frequency, risk ratings and loss recovery rates, as well as other credit trends.
Qualitative Component
The qualitative management adjustment component includes risks that are not fully captured in the quantitative component. These may include but are not limited to portfolio characteristics, idiosyncratic events, factors not within historical loss data or the economic forecast, uncertainty in the environment and other factors as required by banking supervisory guidance for the ACL. The primary examples of these are:
•Normalization of portfolio performance and consumer behavior from low losses as a result of government stimulus and market liquidity during the COVID-19 pandemic
•Potential impacts on vulnerable industries and regions due to emerging macroeconomic risks and uncertainties, including those related to potential global recession, inflation, interest rates, commodity prices and geopolitical tensions
•Transfer risk associated with exposures outside the U.S. for certain safety and soundness considerations under U.S. banking law
As of the third quarter of 2023, Citi’s qualitative component of the ACL continued to decline quarter-over-quarter. The decline was primarily driven by releases of COVID-19–related uncertainty reserves, as the portfolio continues to normalize toward pre-pandemic levels and as risks are captured in the quantitative component of the ACL. These releases were partially offset by a build for
macroeconomic risks and uncertainties impacting vulnerable industries and regions in the corporate portfolio, including continued high interest rates.
Macroeconomic Variables
Citi considers a multitude of global macroeconomic variables for the base, upside and downside probability-weighted macroeconomic scenario forecasts it uses to estimate the ACL. Citi’s forecasts of the U.S. unemployment rate and U.S. real GDP growth rate represent the key macroeconomic variables that most significantly affect its estimate of the ACL.
The tables below present Citi’s forecasted quarterly average U.S. unemployment rate and year-over-year U.S. real GDP growth rate used in determining the base macroeconomic forecast for Citi’s ACL for each quarterly reporting period from 3Q22 to 3Q23:
| Quarterly average | ||||||||
|---|---|---|---|---|---|---|---|---|
| U.S. unemployment | 4Q23 | 2Q24 | 4Q24 | 8-quarter average(1) | ||||
| Citi forecast at 3Q22 | 4.3 | % | 4.0 | % | 4.0 | % | 4.0 | % |
| Citi forecast at 4Q22 | 4.7 | 4.5 | 4.4 | 4.4 | ||||
| Citi forecast at 1Q23 | 4.3 | 4.6 | 4.5 | 4.3 | ||||
| Citi forecast at 2Q23 | 4.1 | 4.5 | 4.5 | 4.3 | ||||
| Citi forecast at 3Q23 | 3.9 | 4.3 | 4.4 | 4.2 |
(1) Represents the average unemployment rate for the rolling, forward-looking eight quarters in the forecast horizon.
| Year-over-year growth rate(1) | ||||||
|---|---|---|---|---|---|---|
| Full year | ||||||
| U.S. real GDP | 2023 | 2024 | 2025 | |||
| Citi forecast at 3Q22 | 0.6 | % | 1.9 | % | 2.7 | % |
| Citi forecast at 4Q22 | 0.3 | 1.5 | 2.2 | |||
| Citi forecast at 1Q23 | 1.0 | 1.0 | 2.0 | |||
| Citi forecast at 2Q23 | 1.3 | 0.7 | 2.0 | |||
| Citi forecast at 3Q23 | 2.1 | 1.0 | 2.0 |
(1) The year-over-year growth rate is the percentage change in the real (inflation adjusted) GDP level.
Under the base macroeconomic forecast as of 3Q23, U.S. real GDP growth is expected to decline in the last quarter of 2023 before recovering in 2024, while the unemployment rate is expected to increase modestly over the eight-quarter forecast horizon, broadly returning to pre-pandemic levels.
Scenario Weighting
Citi’s ACL is estimated using three probability-weighted macroeconomic scenarios—base, upside and downside. The macroeconomic scenario weights are estimated using a statistical model, which, among other factors, takes into consideration key macroeconomic drivers of the ACL, severity of the scenario and other macroeconomic uncertainties and risks. Citi evaluates scenario weights on a quarterly basis.
Citi’s downside scenario incorporates more adverse macroeconomic assumptions than the base scenario. For example, compared to the base scenario, Citi’s downside scenario reflects a severe recession, including an elevated
average U.S. unemployment rate of 6.8% over the eight-quarter R&S period, with a peak difference of 3.2% in the first quarter of 2025. The downside scenario also reflects a year-over-year U.S. real GDP contraction in 2024 of 2.5%, with a peak quarter-over-quarter difference to the base scenario of 1.2% in the fourth quarter of 2023.
Citi’s ACL is sensitive to the various macroeconomic scenarios that drive the quantitative component of expected credit losses due to changes in the length and severity of forecasted economic variables or events in the respective scenarios. To demonstrate this sensitivity, Citi applied 100% weight to the downside scenario as of September 30, 2023, to reflect the most severe economic deterioration forecast in the multiple macroeconomic scenarios. Citi’s downside scenario incorporates more adverse macroeconomic assumptions than the weighted scenario assumptions; therefore, applying a 100% downside scenario weight would result in a hypothetical increase in the ACL of approximately $4.8 billion related to lending exposures, except for loans individually evaluated for credit losses.
This analysis does not incorporate any impacts or changes to the qualitative component of the ACL. These factors could change the outcome of the sensitivity analysis based on historical experience and current conditions at the time of the assessment. Given the uncertainty inherent in macroeconomic forecasting, Citi continues to believe that its ACL estimate based on a three probability-weighted macroeconomic scenario approach combined with the qualitative component remains appropriate as of September 30, 2023.
3Q23 Changes in the ACL
As further discussed below, Citi’s ending ACL balance for the third quarter of 2023 was $20.2 billion, compared to $20.1 billion as of June 30, 2023. The net build of $0.2 billion was primarily driven by growth in card balances in PBWM and corporate builds primarily related to specific risks and uncertainties impacting vulnerable industries and regions, partially offset by improvement in key macroeconomic variable forecasts. Citi believes its analysis of the ACL reflects the forward view of the economic environment as of September 30, 2023. See Note 14 for additional information.
Consumer Allowance for Credit Losses on Loans
Citi’s consumer ACLL is largely driven by U.S. cards (Branded cards and Retail services) in U.S. Personal Banking. Citi’s total consumer ACLL build was $0.1 billion in the third quarter of 2023, primarily driven by growth in U.S. cards balances, resulting in a September 30, 2023 ACLL balance of $14.9 billion, or 3.95% of total funded consumer loans.
For U.S. cards, the level of reserves relative to total funded loans decreased to 7.81% at September 30, 2023, due to macroeconomic improvement, compared to 7.86% at June 30, 2023. For the remaining consumer exposures, the level of reserves relative to total funded loans was 1.24% at September 30, 2023, compared to 1.28% at June 30, 2023.
Corporate Allowance for Credit Losses on Loans
Citi had a corporate ACLL build of $0.1 billion in the third quarter of 2023. The build was primarily driven by specific risks and uncertainties impacting vulnerable industries and regions, partially offset by improved key macroeconomic variable forecasts. The ACLL reserve balance increased by $0.1 billion to $2.7 billion, or 0.97% of total funded corporate loans.
ACLUC
Citi had an ACLUC release of $0.1 billion in the third quarter of 2023, which reduced the ACLUC reserve balance, included in Other liabilities, to $1.8 billion. The release was primarily driven by changes in the corporate portfolio and improved key macroeconomic variable forecasts.
ACL on Other Financial Assets
Citi’s ending ACL balance on other financial assets carried at amortized cost for the third quarter of 2023 was $0.8 billion, compared to $0.8 billion as of June 30, 2023. The net build of $0.1 billion was primarily driven by a deterioration in certain macroeconomic variable forecasts, primarily impacting other financial assets. See Note 14 for additional information.
Regulatory Capital Impact
Citi elected the modified CECL transition provision for regulatory capital purposes provided by the U.S. banking agencies’ final rule. Accordingly, the Day One regulatory capital effects resulting from the adoption of CECL, as well as the ongoing adjustments for 25% of the change in CECL-based allowances in each quarter between January 1, 2020 and December 31, 2021, started to be phased in on January 1, 2022 and will be fully reflected in Citi’s regulatory capital as of January 1, 2025.
See Notes 1 and 14 for a further description of the ACL and related accounts.
Goodwill
Citi tests for goodwill impairment annually as of October 1 (the annual test) and conducts interim assessments between the annual test if an event occurs or circumstances change that would more-likely-than-not reduce the fair value of a reporting unit below its carrying amount. These events or circumstances include, among other things, a significant adverse change in the business climate, a decision to sell or dispose of all or a significant portion of a reporting unit or a sustained decrease in Citi’s stock price.
At October 1, 2022, the fair value of two reporting units (Banking and Mexico Consumer/SBMM) ranged from 102% to 106% of their carrying values. The carrying values of the Banking and Mexico Consumer/SBMM reporting units included approximately $1.5 billion and $1 billion of goodwill, respectively. For each of the remaining reporting units, fair value exceeded carrying value by at least 10%.
While the inherent risk related to uncertainty is embedded in the key assumptions used in the valuations of the reporting units, the economic and business environments continue to evolve as Citi’s management implements its strategic refresh. If management’s future estimates of key economic and market assumptions were to differ from its current assumptions, Citi could potentially experience material goodwill impairment charges in the future. See Note 15 for a further discussion of goodwill.
Litigation Accruals
See the discussion in Note 26 for information regarding Citi’s policies on establishing accruals for litigation and regulatory contingencies.
INCOME TAXES
Effective Tax Rate
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| In millions of dollars, except effective tax rate | 2023 | 2022 | 2023 | 2022 | ||||||||
| Income from continuing operations before income tax expense | $ | 4,788 | $ | 4,394 | $ | 15,013 | $ | 15,631 | ||||
| Provision for income taxes | 1,203 | 879 | 3,824 | 3,002 | ||||||||
| Effective tax rate | 25 | % | 20 | % | 25 | % | 19 | % |
Citi’s effective tax rate was 25% in the third quarter of 2023 versus 20% in the third quarter of 2022, both including the impact of divestitures, largely driven by the geographic mix of earnings. Citi recognized a third quarter of 2023 tax provision benefit of approximately $60 million related to tax law changes. For the nine months ended September 30, 2023, Citi’s effective tax rate increased to 25%, compared to 19% in the prior-year period, both including the impact of divestitures, largely driven by the geographic mix of earnings and lower discrete tax benefits.
Deferred Tax Assets
For additional information on Citi’s deferred tax assets (DTAs), see “Capital Resources,” “Risk Factors—Strategic Risks,” “Significant Accounting Policies and Significant Estimates—Income Taxes” and Notes 1 and 9 to the Consolidated Financial Statements in Citi’s 2022 Form 10-K.
The table below summarizes Citi’s net DTAs balance:
| Jurisdiction/Component | DTAs balance | |||
|---|---|---|---|---|
| In billions of dollars | September 30,<br>2023 | December 31, 2022 | ||
| Total U.S. | $ | 25.4 | $ | 24.8 |
| Total foreign | 2.9 | 2.9 | ||
| Total | $ | 28.3 | $ | 27.7 |
At September 30, 2023, Citigroup had recorded net DTAs of approximately $28.3 billion, a decrease of $0.2 billion from June 30, 2023 and an increase of $0.6 billion from December 31, 2022. The decrease for the third quarter was primarily from income in Other comprehensive income, and the year-to-date increase was primarily a result of Citi’s geographic mix of earnings. Of Citi’s $28.3 billion of net DTAs, $11.2 billion (compared to $11.7 billion at June 30, 2023) was deducted in calculating Citi’s regulatory capital, and the remaining $17.1 billion was appropriately risk weighted under the Basel III rules.
The $11.2 billion of DTAs deducted from regulatory capital was composed of $11.2 billion related to tax carry-forwards, with $1.8 billion of temporary differences in excess of the 10%/15% regulatory limitations, reduced by $1.8 billion of deferred tax liabilities, primarily associated with goodwill and certain other intangible assets that were separately deducted from capital.
DTA Realizability
Citi believes that realization of the net DTAs of $28.3 billion at September 30, 2023 is more-likely-than-not, based on management’s expectations of future taxable income generation in the jurisdictions in which the DTAs arise, as well as consideration of available tax planning strategies (as defined in ASC Topic 740, Income Taxes).
DISCLOSURE CONTROLS AND PROCEDURES
Citi’s disclosure controls and procedures are designed to ensure that information required to be disclosed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, including without limitation that information required to be disclosed by Citi in its SEC filings is accumulated and communicated to management, including the Chief Executive Officer (CEO) and Chief Financial Officer (CFO), as appropriate, to allow for timely decisions regarding required disclosure.
Citi’s Disclosure Committee assists the CEO and CFO in their responsibilities to design, establish, maintain and evaluate the effectiveness of Citi’s disclosure controls and procedures. The Disclosure Committee is responsible for, among other things, the oversight, maintenance and implementation of the disclosure controls and procedures, subject to the supervision and oversight of the CEO and CFO.
Citi’s management, with the participation of its CEO and CFO, has evaluated the effectiveness of Citigroup’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of September 30, 2023. Based on that evaluation, the CEO and CFO have concluded that at that date Citigroup’s disclosure controls and procedures were effective.
DISCLOSURE PURSUANT TO SECTION 219 OF THE IRAN THREAT REDUCTION AND SYRIA HUMAN RIGHTS ACT
Pursuant to Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012 (Section 219), which added Section 13(r) to the Securities Exchange Act of 1934, as amended, Citi is required to disclose in its annual or quarterly reports, as applicable, whether it or any of its affiliates knowingly engaged in certain activities, transactions or dealings relating to Iran or with certain individuals or entities that are the subject of sanctions under U.S. law. Disclosure is generally required even where the activities, transactions or dealings were conducted in compliance with applicable law. To the extent that transactions or dealings for its clients are permitted by U.S. law, Citi may continue to engage in such activities.
Citi, in its First Quarter of 2023 Form 10-Q, identified and reported certain activities pursuant to Section 219 for the fourth quarter of 2022. Citi, in its Second Quarter of 2023 Form 10-Q, identified and reported certain activities pursuant to Section 219 for the second quarter of 2023. During the third quarter of 2023, Citigroup identified one transaction pursuant to Section 219.
On July 26, 2023, Citibank Europe plc, Czech Republic Branch, processed a payment to the Iranian Embassy in the Czech Republic for the payment of fees for a travel tourist visa. The total value of the payment was CZK 1,200.00 (approximately USD 51.80). Nominal fees were realized for the processing of this payment. This payment was permissible under the travel exemption of the Iranian Transactions and Sanctions Regulations.
FORWARD-LOOKING STATEMENTS
Certain statements in this Form 10-Q, including but not limited to statements included within the Management’s Discussion and Analysis of Financial Condition and Results of Operations, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. In addition, Citigroup may make forward-looking statements in its other documents filed or furnished with the SEC, and its management may make forward-looking statements orally to analysts, investors, representatives of the media and others.
Generally, forward-looking statements are not based on historical facts but instead represent Citigroup’s and its management’s beliefs regarding future events. Such statements may be identified by words such as believe, expect, anticipate, intend, estimate, may increase, may fluctuate, target and illustrative, and similar expressions or future or conditional verbs such as will, should, would and could.
Such statements are based on management’s current expectations and are subject to risks, uncertainties and changes in circumstances. Actual results of operations and financial conditions, including capital and liquidity, may differ materially from those included in these statements due to a variety of factors, including without limitation (i) the precautionary statements included within the “Executive Summary” and each business’s discussion and analysis of its results of operations above, in Citi’s Second Quarter of 2023 Form 10-Q, in Citi’s First Quarter of 2023 Form 10-Q, in Citi’s 2022 Form 10-K and in Citi’s other SEC filings; (ii) the factors listed and described under “Risk Factors” in Citi’s 2022 Form 10-K; and (iii) the risks and uncertainties summarized below:
•the potential impact to Citi from continued macroeconomic, geopolitical and other challenges, uncertainties and volatility, including, among others, governmental fiscal and monetary actions or expected actions, including continued elevated interest rates, reductions in central bank balance sheets, or other restrictive interest rate or other monetary policies; potential recessions in the U.S., Europe and other regions and countries; a potential U.S. federal government shutdown and the resulting impacts; sustained elevated levels of inflation and their impacts; economic and geopolitical challenges related to China, including weak economic growth, driven in part by challenges in its real estate sector, and tensions or conflicts between China and Taiwan and/or involving China and the U.S.; other geopolitical challenges, tensions and conflicts, including those related to Russia’s war in Ukraine and potential escalation of the conflict in the Middle East; foreign currency volatility and devaluations; distress and volatility in emerging markets, including sovereign debt pricing; protracted or widespread trade tensions; and election outcomes;
•the potential impact on Citi’s ability to return capital to common shareholders consistent with its capital planning efforts and targets, due to, among other things: changes in regulatory capital rules, requirements or interpretations,
such as revisions to the U.S. Basel III rules, including the recently issued notice of proposed rulemaking, known as the Basel III Endgame, related to regulatory capital requirements; annual recalibration of the Stress Capital Buffer (increased effective as of October 1, 2023); recalibration of the GSIB surcharge; Citi’s results of operations and financial condition, including the capital impact related to Citi’s remaining consumer banking divestitures, and achievement of the expected benefits from the divestitures; Citi’s effectiveness in planning, managing and calculating its level of risk-weighted assets under both the Advanced Approaches and the Standardized Approach and Supplementary Leverage ratio and GSIB surcharge; Citi’s implementation and maintenance of an effective capital planning framework; forecasts of macroeconomic conditions; and Citi’s DTA utilization;
•the ongoing regulatory and legislative uncertainties and changes faced by financial institutions, including Citi, in the U.S. and globally, such as potential changes to various aspects of the regulatory capital framework and requirements applicable to Citi; potential fiscal, monetary, regulatory, tax, sanctions and other changes, including potential increased regulatory requirements and costs, such as the imposition of additional or special assessments by the FDIC, including the recently issued notice of proposed rulemaking to recover the losses from recent bank failures; potential changes in regulatory requirements relating to interest rate risk management; future legislative and regulatory requirements in the U.S. and globally relating to sustainability and climate change, including any new disclosure requirements, such as those proposed and/or adopted by the SEC, the EU and the State of California; increased legislative activity by U.S. states that restricts the flow of capital and investment by financial institutions to state governmental entities, including anti-ESG initiatives that are designed to push back against corporate ESG policies; and the potential impact these uncertainties and changes could have on Citi’s businesses, results of operations, financial condition, business planning and compliance risks and costs;
•the potential impact to credit card fee revenues in Branded cards and Retail services in PBWM from the Consumer Financial Protection Bureau’s proposed cap on credit card late fees;
•Citi’s ability to improve its risk and controls environment, modernize its data and technology infrastructure and further enhance safety and soundness, meet regulatory expectations, be sufficiently competitive, serve clients effectively, avoid operational errors and realize productivity improvements, as part of its transformation and other priorities, including as a result of factors that Citi cannot control, which could make the initiatives more costly and more challenging to implement, and limit their effectiveness;
•Citi’s ability to achieve its objectives from its strategic and other initiatives, such as those related to its investment and simplification priorities, including, among others, achieving productivity improvements and expense
savings, minimizing disruptions to its businesses and managing the execution uncertainty and complexity associated with Citi’s exit of Mexico Consumer/SBMM, which may not be as productive, effective or timely as Citi expects, and could result in CTA and other losses, charges or other negative financial or strategic impacts, which could be material;
•the potential impact to Citi from climate change and the transition to a low-carbon economy, including both physical risks, such as increased frequency and/or severity of adverse weather events as consequences of chronic climate changes, and transition risks, such as those arising from changes in regulations or market preferences toward a low-carbon economy; higher regulatory, compliance, credit, reputational and other risks and costs and data-related challenges, including as a result of any new disclosure requirements; and an increased focus by banking regulators and others on the issue of climate change at financial institutions directly and with respect to their clients;
•Citi’s ability to utilize its DTAs (including the foreign tax credit component of its DTAs) and thus reduce the negative impact of the DTAs on Citi’s regulatory capital, including as a result of its ability to generate U.S. taxable income in the relevant tax carry-forward periods;
•the potential impact to Citi if its interpretation or application of the complex income-based and non-income based (such as withholding, stamp, service and other non-income taxes) tax laws to which it is subject in the U.S. and in non-U.S. jurisdictions differs from those of the relevant governmental taxing authorities, including as a result of litigation or examinations regarding non-income-based tax matters, and the resulting payment of additional taxes, penalties or interest;
•the potential impact from a deterioration in or failure to maintain Citi’s co-branding or private label credit card relationships, due to, among other things, the general economic environment; changes in consumer sentiment, spending patterns and credit card usage behaviors; a decline in sales and revenues, partner store closures or other operational difficulties of the retailer or merchant; early termination of a particular relationship; or other factors, including bankruptcies, liquidations, restructurings, consolidations or other similar events, whether due to the impact of a challenging economic environment or otherwise;
•Citi’s ability to address any shortcomings or deficiencies or guidance provided by the Federal Reserve Board or FDIC on its resolution and recovery plan submissions;
•the potential impact on Citi’s performance and the performance of its individual businesses, including its competitive position and ability to effectively manage its businesses, and its ability to effectively execute its transformation and strategic and other initiatives, if Citi is unable to attract, retain and motivate highly qualified employees, particularly given the highly competitive environment for talent and other factors, such as potential attrition driven by Citi’s simplification initiatives, low unemployment, changes in workers’ expectations and
regulation of employee compensation in the banking industry;
•Citi’s ability to compete effectively in the U.S. and globally with both financial and non-financial services firms, including as a result of certain competitors being subject to less stringent legal and regulatory requirements; the introduction of new or emerging technologies and mobile platforms; possible disruptions from artificial intelligence-driven solutions; growth in digital asset markets; changes in the payments space; reliance on third parties for certain product and service offerings and impact if any third party is unable to provide adequate support for such product and service offerings; and the increased operational, compliance and other risks resulting from the need to develop new or change or adapt existing products and services to attract and retain customers or clients or to compete more effectively with competitors;
•the potential impact to Citi from a prior or future failure or disruption of its operational processes or systems, including as a result of, among other things, human error, such as manual transaction processing errors (e.g., erroneous payments to lenders or manual errors by Citi traders that cause system and market disruptions and losses for Citi or its clients), which can be exacerbated by staffing challenges and processing backlogs; fraud or malice on the part of employees or third parties; operational or execution failures or deficiencies by third parties; insufficient (or limited) straight-through processing between legacy systems and any failure to design and effectively operate controls that mitigate operational risks associated with those legacy systems, leading to potential risk of errors and operating losses; accidental system or technological failure; electrical or telecommunication outages; failure of or cyber incidents involving computer servers or infrastructure; other similar losses or damage to Citi’s property or assets; failures by third parties; potential disruptions and/or malfunctions within Citi’s businesses, as well as the operations of Citi’s clients, customers or other third parties; and the increased financial, reputational, legal and compliance risks resulting from any such failure or disruption of operational processes or systems, including legal and regulatory actions or proceedings, fines and other costs;
•the increasing risk to Citi’s and third parties’ computer systems and networks from continually evolving, sophisticated cybersecurity incidents that could result in, among other things, theft, loss, misuse or disclosure of confidential Citi, client or customer information or assets and a disruption of computer, software or network systems; and the potential impact from such risks, including reputational damage, regulatory penalties, loss of revenues, additional costs (including repair, remediation and other costs), exposure to litigation and other financial losses;
•the potential impact of changes or errors in accounting assumptions, judgments or estimates, or the application of certain accounting principles, related to the preparation of Citi’s financial statements, including the estimate of Citi’s ACL, which depends on its CECL models and
assumptions, forecasted macroeconomic conditions and characteristics of Citi’s loan portfolios and other applicable financial assets; reserves related to litigation, regulatory and tax matters exposures; valuation of DTAs; the fair values of certain assets and liabilities; and the assessment of goodwill and other assets for impairment;
•the financial impact from reclassification of any CTA component of AOCI, including related hedges and taxes, into Citi’s earnings, due to a sale, IPO, substantial liquidation or other deconsolidation event of any foreign operations or equity investments, such as those related to Citi’s remaining consumer banking divestitures or other legacy businesses, whether due to Citi’s strategic refresh or otherwise;
•the impact of changes to financial accounting and reporting standards or interpretations of how Citi records and reports its financial condition and results of operations;
•the potential impact to Citi’s results of operations and/or regulatory capital and capital ratios if Citi’s risk management and mitigation processes, strategies or models, including those related to its comprehensive stress testing initiatives or ability to manage, assess and aggregate data, are deficient or ineffective, or Citi’s Basel III regulatory capital models require refinement, modification or enhancement, or any related action is taken by Citi’s U.S. banking regulators;
•the potential impact of credit risk and concentrations of risk on Citi’s results of operations, whether due to a default of or deterioration involving consumer, corporate or public sector borrowers or other counterparties in the U.S. or in various countries and jurisdictions globally, including from indemnification obligations in connection with various transactions, such as hedging or reinsurance arrangements related to those obligations, or Citi’s inability to liquidate or realize the fair value of its collateral, which risks can be heightened for vulnerable industries or sectors impacted by the continued macroeconomic, geopolitical, market and other challenges and uncertainties and volatilities;
•the potential impact on Citi’s liquidity and/or costs of funding if it does not effectively manage its liquidity or due to various other factors, including, among others, general disruptions in the financial markets; deposit outflows or unfavorable changes in deposit mix, whether driven by migration to higher-yielding products, competition or otherwise, which could be exacerbated by the rapid spread of information via social or mainstream media; governmental fiscal and monetary policies; regulatory changes; negative investor perceptions of Citi’s creditworthiness; competition for funding, including a decrease in demand for corporate debt, unexpected increases in cash or collateral requirements, and the consequent inability to monetize available liquidity resources; changes in Citi’s credit spreads; higher interest rates; and changes in currency exchange rates;
•the impact of a credit ratings downgrade of Citi or certain of its subsidiaries or issuing entities on Citi’s funding and liquidity as well as on the operations of certain of its businesses;
•the potential impact to Citi of ongoing interpretation and implementation of regulatory and legislative requirements and changes in the U.S. and globally, as well as heightened regulatory scrutiny and expectations for large financial institutions and their employees and agents, with respect to governance, infrastructure, data, climate and risk management practices and controls, customer and client protection, market practices, anti-money laundering and increasingly complex sanctions and disclosure regimes, including the impact on Citi’s compliance, regulatory and other risks and costs, such as increased regulatory oversight and restrictions, enforcement proceedings, penalties and fines;
•the potential outcomes of the extensive legal and regulatory proceedings, examinations, investigations, consent orders and related compliance efforts and other inquiries to which Citi is or may be subject at any given time, such as the previously disclosed October 2020 FRB and OCC consent orders, particularly given the increased focus by regulators on risk and controls, such as enterprise-wide risk management, compliance, data quality management and governance and internal controls, and policies and procedures; Citi’s ability to implement targeted actions plans and submit quarterly progress reports detailing the results and status of improvements to comply with the consent orders on a timely and sufficient basis, which will continue to require significant investments to meet regulatory expectations; and the heightened scrutiny and expectations generally from regulators, and the severity of the remedies that may be sought by regulators, such as significant monetary penalties, supervisory or enforcement orders, business restrictions, limitations on dividends, changes to directors and/or officers and collateral consequences to Citi arising from such outcomes; and
•the various risks faced by Citi as a result of its presence in the emerging markets, including, among others, limitations or unavailability of hedges on foreign investments; foreign currency volatility and devaluations; sustained elevated interest rates and other restrictive monetary policies; elevated inflation and hyperinflation; sovereign debt volatility; election outcomes; regulatory changes and political events; foreign exchange controls, including the inability to access indirect foreign exchange mechanisms; macroeconomic and geopolitical challenges and uncertainties and volatility, including with respect to commodity prices as well as repricing of assets and resulting impacts; limitations on foreign investment; sociopolitical instability; civil unrest; crime, corruption and fraud; cyberattacks; nationalization or loss of licenses; business restrictions; sanctions or asset freezes; potential criminal charges; closure of branches or subsidiaries; confiscation of assets, whether related to geopolitical conflicts or otherwise; the need to record additional reserves based on the transfer risk associated with exposures outside the U.S. driven by safety and soundness considerations under U.S. banking law; risks related to the ongoing wind-down of Citi’s operations in Russia; and increased compliance and regulatory risks and costs.
Any forward-looking statements made by or on behalf of Citigroup speak only as to the date they are made, and Citi does not undertake to update forward-looking statements to reflect the impact of circumstances or events that arise after the date that the forward-looking statements were made.
FINANCIAL STATEMENTS AND NOTES TABLE OF CONTENTS
| CONSOLIDATED FINANCIAL STATEMENTS | |
|---|---|
| Consolidated Statement of Income (Unaudited)—<br>For the Three and Nine Months Ended September 30, 2023 and 2022 | 90 |
| Consolidated Statement of Comprehensive Income (Unaudited)—For the Three and Nine Months Ended September 30, 2023 and 2022 | 91 |
| Consolidated Balance Sheet—September 30, 2023 (Unaudited) and December 31, 2022 | 92 |
| Consolidated Statement of Changes in Stockholders’ Equity (Unaudited)—For the Three and Nine Months Ended September 30, 2023 and 2022 | 94 |
| Consolidated Statement of Cash Flows (Unaudited)—<br>For the Nine Months Ended September 30, 2023 and 2022 | 96 |
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) | |
| --- | --- |
| Note 1—Basis of Presentation, Updated Accounting Policies<br> and Accounting Changes | 98 |
| Note 2—Discontinued Operations, Significant Disposals<br> and Other Business Exits | 100 |
| Note 3—Operating Segments | 103 |
| Note 4—Interest Revenue and Expense | 105 |
| Note 5—Commissions and Fees; Administration and Other <br> Fiduciary Fees | 106 |
| Note 6—Principal Transactions | 108 |
| Note 7—Incentive Plans | 109 |
| Note 8—Retirement Benefits | 109 |
| Note 9—Earnings per Share | 113 |
| Note 10—Securities Borrowed, Loaned and Subject to <br> Repurchase Agreements | 114 |
| Note 11—Brokerage Receivables and Brokerage Payables | 116 |
| Note 12—Investments | 117 |
| Note 13—Loans | 125 |
| Note 14—Allowance for Credit Losses | 145 |
| --- | --- |
| Note 15—Goodwill and Intangible Assets | 150 |
| Note 16—Deposits | 151 |
| Note 17—Debt | 152 |
| Note 18—Changes in Accumulated Other Comprehensive <br> Income (Loss) (AOCI) | 153 |
| Note 19—Preferred Stock | 158 |
| Note 20—Securitizations and Variable Interest Entities | 160 |
| Note 21—Derivatives | 168 |
| Note 22—Fair Value Measurement | 179 |
| Note 23—Fair Value Elections | 199 |
| Note 24—Guarantees and Commitments | 203 |
| Note 25—Leases | 208 |
| Note 26—Contingencies | 209 |
| Note 27—Subsidiary Guarantees | 211 |
CONSOLIDATED FINANCIAL STATEMENTS
| CONSOLIDATED STATEMENT OF INCOME (UNAUDITED) | Citigroup Inc. and Subsidiaries | | --- | --- || | Three Months Ended September 30, | | | | Nine Months Ended September 30, | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | In millions of dollars, except per share amounts | 2023 | | 2022 | | 2023 | | 2022 | | | Revenues | | | | | | | | | | Interest revenue | $ | 34,837 | $ | 19,919 | $ | 96,879 | $ | 48,700 | | Interest expense | 21,009 | | 7,356 | | 55,803 | | 13,302 | | | Net interest income | $ | 13,828 | $ | 12,563 | $ | 41,076 | $ | 35,398 | | Commissions and fees | $ | 2,195 | $ | 2,139 | $ | 6,693 | $ | 7,159 | | Principal transactions | 3,008 | | 2,625 | | 9,475 | | 11,740 | | | Administration and other fiduciary fees | 971 | | 915 | | 2,856 | | 2,904 | | | Realized gains on sales of investments, net | 30 | | 52 | | 151 | | 74 | | | Impairment losses on investments: | | | | | | | | | | Impairment losses on investments and other assets | (70) | | (91) | | (227) | | (277) | | | (Provision) releases for credit losses on AFS debt securities(1) | (1) | | 5 | | (1) | | 7 | | | Net impairment losses recognized in earnings | $ | (71) | $ | (86) | $ | (228) | $ | (270) | | Other revenue | $ | 178 | $ | 300 | $ | 999 | $ | 327 | | Total non-interest revenues | $ | 6,311 | $ | 5,945 | $ | 19,946 | $ | 21,934 | | Total revenues, net of interest expense | $ | 20,139 | $ | 18,508 | $ | 61,022 | $ | 57,332 | | Provisions for credit losses and for benefits and claims | | | | | | | | | | Provision for credit losses on loans | $ | 1,816 | $ | 1,328 | $ | 5,314 | $ | 2,972 | | Provision (release) for credit losses on HTM debt securities | (3) | | 10 | | (24) | | 28 | | | Provision for credit losses on other assets | 56 | | 73 | | 630 | | 76 | | | Policyholder benefits and claims | 25 | | 25 | | 63 | | 74 | | | Provision (release) for credit losses on unfunded lending commitments | (54) | | (71) | | (344) | | 244 | | | Total provisions for credit losses and for benefits and claims(2) | $ | 1,840 | $ | 1,365 | $ | 5,639 | $ | 3,394 | | Operating expenses | | | | | | | | | | Compensation and benefits | $ | 7,424 | $ | 6,745 | $ | 22,350 | $ | 20,037 | | Premises and equipment | 620 | | 557 | | 1,813 | | 1,719 | | | Technology/communication | 2,256 | | 2,145 | | 6,692 | | 6,229 | | | Advertising and marketing | 324 | | 407 | | 1,016 | | 1,132 | | | Other operating | 2,887 | | 2,895 | | 8,499 | | 9,190 | | | Total operating expenses | $ | 13,511 | $ | 12,749 | $ | 40,370 | $ | 38,307 | | Income from continuing operations before income taxes | $ | 4,788 | $ | 4,394 | $ | 15,013 | $ | 15,631 | | Provision for income taxes | 1,203 | | 879 | | 3,824 | | 3,002 | | | Income from continuing operations | $ | 3,585 | $ | 3,515 | $ | 11,189 | $ | 12,629 | | Discontinued operations | | | | | | | | | | Income (loss) from discontinued operations | $ | 2 | $ | (6) | $ | — | $ | (270) | | Benefit for income taxes | — | | — | | — | | (41) | | | Income (loss) from discontinued operations, net of taxes | $ | 2 | $ | (6) | $ | — | $ | (229) | | Net income before attribution to noncontrolling interests | $ | 3,587 | $ | 3,509 | $ | 11,189 | $ | 12,400 | | Noncontrolling interests | 41 | | 30 | | 122 | | 68 | | | Citigroup’s net income | $ | 3,546 | $ | 3,479 | $ | 11,067 | $ | 12,332 | | Basic earnings per share(3) | | | | | | | | | | Income from continuing operations | $ | 1.64 | $ | 1.64 | $ | 5.19 | $ | 5.99 | | Income from discontinued operations, net of taxes | — | | — | | — | | (0.12) | | | Net income | $ | 1.64 | $ | 1.64 | $ | 5.19 | $ | 5.87 | | Weighted average common shares outstanding (in millions) | 1,924.4 | | 1,936.8 | | 1,936.9 | | 1,950.0 | | | Diluted earnings per share(3) | | | | | | | | | | Income from continuing operations | $ | 1.63 | $ | 1.63 | $ | 5.14 | $ | 5.95 | | Income (loss) from discontinued operations, net of taxes | — | | — | | — | | (0.12) | | | Net income | $ | 1.63 | $ | 1.63 | $ | 5.14 | $ | 5.84 | | Adjusted weighted average diluted common shares outstanding<br><br>(in millions) | 1,951.7 | | 1,955.1 | | 1,961.5 | | 1,967.1 | |
(1) In accordance with ASC 326, which requires the provision for credit losses on AFS securities to be included in revenue.
(2) This total excludes the provision for credit losses on AFS securities, which is disclosed separately above.
(3) Due to rounding, earnings per share on continuing operations and discontinued operations may not sum to earnings per share on net income.
The Notes to the Consolidated Financial Statements are an integral part of these Consolidated Financial Statements.
| CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME | Citigroup Inc. and Subsidiaries | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| (UNAUDITED) | Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | |||
| In millions of dollars | 2023 | 2022 | 2023 | 2022 | |||||||
| Citigroup’s net income | $ | 3,546 | $ | 3,479 | $ | 11,067 | $ | 12,332 | |||
| Add: Citigroup’s other comprehensive income, net change, net of taxes(1) | |||||||||||
| Unrealized gains and losses on debt securities(2) | $ | (169) | $ | (580) | $ | 793 | $ | (6,358) | |||
| Debt valuation adjustment (DVA)(3) | 299 | 872 | (645) | 3,632 | |||||||
| Cash flow hedges | 731 | (763) | 1,263 | (2,970) | |||||||
| Benefit plans liability adjustment(4) | 312 | 37 | 72 | 119 | |||||||
| CTA, net of hedges | (1,496) | (2,399) | (632) | (4,043) | |||||||
| Excluded component of fair value hedges | (12) | 30 | (15) | 87 | |||||||
| Long-duration insurance contracts | 23 | — | 22 | — | |||||||
| Citigroup’s total other comprehensive income (loss) | $ | (312) | $ | (2,803) | $ | 858 | $ | (9,533) | |||
| Citigroup’s total comprehensive income | $ | 3,234 | $ | 676 | $ | 11,925 | $ | 2,799 | |||
| Add: Other comprehensive income (loss) attributable to <br>noncontrolling interests | (37) | (44) | 9 | (126) | |||||||
| Add: Net income (loss) attributable to noncontrolling interests | 41 | 30 | 122 | 68 | |||||||
| Total comprehensive income | $ | 3,238 | $ | 662 | $ | 12,056 | $ | 2,741 |
(1)See Note 18.
(2)See Note 12.
(3)See Note 22.
(4)See Note 8.
The Notes to the Consolidated Financial Statements are an integral part of these Consolidated Financial Statements.
| CONSOLIDATED BALANCE SHEET | Citigroup Inc. and Subsidiaries | | --- | --- || | September 30, | | | | | --- | --- | --- | --- | --- | | | 2023 | | December 31, | | | In millions of dollars | (Unaudited) | | 2022 | | | Assets | | | | | | Cash and due from banks (including segregated cash and other deposits) | $ | 26,548 | $ | 30,577 | | Deposits with banks, net of allowance | 227,439 | | 311,448 | | | Securities borrowed and purchased under agreements to resell (including $206,151 and $239,527 as of September 30, 2023 and December 31, 2022, respectively, at fair value), net of allowance | 335,059 | | 365,401 | | | Brokerage receivables, net of allowance | 66,194 | | 54,192 | | | Trading account assets (including $179,948 and $133,535 pledged to creditors as of September 30, 2023 and December 31, 2022, respectively) | 406,368 | | 334,114 | | | Investments: | | | | | | Available-for-sale debt securities (including $14,720 and $10,933 pledged to creditors as of September 30, 2023 and December 31, 2022, respectively) | 241,783 | | 249,679 | | | Held-to-maturity debt securities, net of allowance (fair value of which is $231,002 and $243,648 as of September 30, 2023 and December 31, 2022, respectively) (includes $8 and $0 pledged to creditors as of September 30, 2023 and December 31, 2022, respectively) | 259,456 | | 268,863 | | | Equity securities (including $738 and $895 as of September 30, 2023 and December 31, 2022, respectively, at fair value) | 7,759 | | 8,040 | | | Total investments | $ | 508,998 | $ | 526,582 | | Loans: | | | | | | Consumer (including $222 and $237 as of September 30, 2023 and December 31, 2022, respectively, at fair value) | 377,714 | | 368,067 | | | Corporate (including $7,189 and $5,123 as of September 30, 2023 and December 31, 2022, respectively, at fair value) | 288,634 | | 289,154 | | | Loans, net of unearned income | $ | 666,348 | $ | 657,221 | | Allowance for credit losses on loans (ACLL) | (17,629) | | (16,974) | | | Total loans, net | $ | 648,719 | $ | 640,247 | | Goodwill | 19,829 | | 19,691 | | | Intangible assets (including MSRs at fair value of $729 and $665 as of September 30, 2023 and December 31, 2022, respectively) | 4,540 | | 4,428 | | | Premises and equipment, net of depreciation and amortization | 27,959 | | 26,253 | | | Other assets (including $13,937 and $10,658 as of September 30, 2023 and December 31, 2022, respectively, at fair value), net of allowance | 96,824 | | 103,743 | | | Total assets | $ | 2,368,477 | $ | 2,416,676 |
Statement continues on the next page.
CONSOLIDATED BALANCE SHEET Citigroup Inc. and Subsidiaries
(Continued)
| September 30, | ||||
|---|---|---|---|---|
| 2023 | December 31, | |||
| In millions of dollars, except shares and per share amounts | (Unaudited) | 2022 | ||
| Liabilities | ||||
| Deposits (including $2,722 and $1,875 as of September 30, 2023 and December 31, 2022, respectively,<br><br>at fair value) | $ | 1,273,506 | $ | 1,365,954 |
| Securities loaned and sold under agreements to repurchase (including $60,662 and $70,886 as of September 30, 2023 and December 31, 2022, respectively, at fair value) | 256,770 | 202,444 | ||
| Brokerage payables (including $7,211 and $4,439 as of September 30, 2023 and December 31, 2022,<br><br>respectively, at fair value) | 75,076 | 69,218 | ||
| Trading account liabilities | 164,624 | 170,647 | ||
| Short-term borrowings (including $6,470 and $6,222 as of September 30, 2023 and December 31, 2022, respectively, at fair value) | 43,166 | 47,096 | ||
| Long-term debt (including $112,629 and $105,995 as of September 30, 2023 and December 31, 2022, respectively, at fair value) | 275,760 | 271,606 | ||
| Other liabilities, plus allowances | 69,380 | 87,873 | ||
| Total liabilities | $ | 2,158,282 | $ | 2,214,838 |
| Stockholders’ equity | ||||
| Preferred stock ($1.00 par value; authorized shares: 30 million), issued shares: as of September 30, 2023—779,800 and as of December 31, 2022—759,800, at aggregate liquidation value | $ | 19,495 | $ | 18,995 |
| Common stock ($0.01 par value; authorized shares: 6 billion), issued shares: as of September 30, 2023—3,099,691,671 and as of December 31, 2022—3,099,669,424 | 31 | 31 | ||
| Additional paid-in capital | 108,757 | 108,458 | ||
| Retained earnings | 202,135 | 194,734 | ||
| Treasury stock, at cost: September 30, 2023—1,185,809,738 shares and <br>December 31, 2022—1,162,682,999 shares | (74,738) | (73,967) | ||
| Accumulated other comprehensive income (loss) (AOCI) | (46,177) | (47,062) | ||
| Total Citigroup stockholders’ equity | $ | 209,503 | $ | 201,189 |
| Noncontrolling interests | 692 | 649 | ||
| Total equity | $ | 210,195 | $ | 201,838 |
| Total liabilities and equity | $ | 2,368,477 | $ | 2,416,676 |
The Notes to the Consolidated Financial Statements are an integral part of these Consolidated Financial Statements.
| CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED) | Citigroup Inc. and Subsidiaries | | --- | --- || | Three Months Ended September 30, | | | | Nine Months Ended September 30, | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | In millions of dollars | 2023 | | 2022 | | 2023 | | 2022 | | | Preferred stock at aggregate liquidation value | | | | | | | | | | Balance, beginning of period | $ | 20,245 | $ | 18,995 | $ | 18,995 | $ | 18,995 | | Issuance of new preferred stock | 1,500 | | — | | 2,750 | | — | | | Redemption of preferred stock | (2,250) | | — | | (2,250) | | — | | | Balance, end of period | $ | 19,495 | $ | 18,995 | $ | 19,495 | $ | 18,995 | | Common stock and additional paid-in capital (APIC) | | | | | | | | | | Balance, beginning of period | $ | 108,610 | $ | 108,241 | $ | 108,489 | $ | 108,034 | | Employee benefit plans | 170 | | 137 | | 296 | | 343 | | | Preferred stock issuance costs (reclassifications to retained earnings for redemptions) | 16 | | — | | 16 | | — | | | Other (primarily preferred stock issuance costs related to new issuances) | (8) | | — | | (13) | | 1 | | | Balance, end of period | $ | 108,788 | $ | 108,378 | $ | 108,788 | $ | 108,378 | | Retained earnings | | | | | | | | | | Balance, beginning of period | $ | 199,976 | $ | 191,261 | $ | 194,734 | $ | 184,948 | | Adjustment to opening balance, net of taxes(1) | | | | | | | | | | Financial instruments—TDRs and vintage disclosures | — | | — | | 290 | | — | | | Adjusted balance, beginning of period | $ | 199,976 | $ | 191,261 | $ | 195,024 | $ | 184,948 | | Citigroup’s net income | 3,546 | | 3,479 | | 11,067 | | 12,332 | | | Common dividends(2) | (1,038) | | (1,001) | | (3,042) | | (3,025) | | | Preferred dividends | (333) | | (277) | | (898) | | (794) | | | Other (primarily reclassifications from APIC for preferred issuance costs on redemptions) | (16) | | — | | (16) | | 1 | | | Balance, end of period | $ | 202,135 | $ | 193,462 | $ | 202,135 | $ | 193,462 | | Treasury stock, at cost | | | | | | | | | | Balance, beginning of period | $ | (74,247) | $ | (73,988) | $ | (73,967) | $ | (71,240) | | Employee benefit plans(3) | 9 | | 11 | | 729 | | 513 | | | Treasury stock acquired(4) | (500) | | — | | (1,500) | | (3,250) | | | Balance, end of period | $ | (74,738) | $ | (73,977) | $ | (74,738) | $ | (73,977) | | Citigroup’s accumulated other comprehensive income (loss) | | | | | | | | | | Balance, beginning of period | $ | (45,865) | $ | (45,495) | $ | (47,062) | $ | (38,765) | | Adjustment to opening balance, net of taxes(1) | — | | — | | 27 | | — | | | Adjusted balance, beginning of period | $ | (45,865) | $ | (45,495) | $ | (47,035) | $ | (38,765) | | Citigroup’s total other comprehensive income | (312) | | (2,803) | | 858 | | (9,533) | | | Balance, end of period | $ | (46,177) | $ | (48,298) | $ | (46,177) | $ | (48,298) | | Total Citigroup common stockholders’ equity | $ | 190,008 | $ | 179,565 | $ | 190,008 | $ | 179,565 | | Total Citigroup stockholders’ equity | $ | 209,503 | $ | 198,560 | $ | 209,503 | $ | 198,560 | | Noncontrolling interests | | | | | | | | | | Balance, beginning of period | $ | 703 | $ | 612 | $ | 649 | $ | 700 | | Transactions between Citigroup and noncontrolling-interest shareholders | (15) | | — | | (14) | | (34) | | | Net income attributable to noncontrolling-interest shareholders | 41 | | 30 | | 122 | | 68 | | | Distributions paid to noncontrolling-interest shareholders | — | | (39) | | (82) | | (51) | | | Other comprehensive income (loss) attributable to noncontrolling-interest shareholders | (37) | | (44) | | 9 | | (126) | | | Other | — | | (2) | | 8 | | — | | | Net change in noncontrolling interests | $ | (11) | $ | (55) | $ | 43 | $ | (143) | | Balance, end of period | $ | 692 | $ | 557 | $ | 692 | $ | 557 | | Total equity | $ | 210,195 | $ | 199,117 | $ | 210,195 | $ | 199,117 |
(1) See Note 1 for additional details.
(2) Common dividends declared were $0.51 per share for each of 1Q23 and 2Q23, $0.53 per share for 3Q23 and $0.51 per share for each of 1Q22, 2Q22 and 3Q22.
(3) Includes treasury stock related to (i) certain activity on employee stock option program exercises where the employee delivers existing shares to cover the option exercise, or (ii) under Citi’s employee restricted or deferred stock programs where shares are withheld to satisfy tax requirements.
(4) Primarily consists of open market purchases under Citi’s Board of Directors–approved common stock repurchase program.
The Notes to the Consolidated Financial Statements are an integral part of these Consolidated Financial Statements.
| CONSOLIDATED STATEMENT OF CASH FLOWS | Citigroup Inc. and Subsidiaries | ||||||
|---|---|---|---|---|---|---|---|
| (UNAUDITED) | Nine Months Ended September 30, | ||||||
| --- | --- | --- | --- | --- | |||
| In millions of dollars | 2023 | 2022 | |||||
| Cash flows from operating activities of continuing operations | |||||||
| Net income before attribution of noncontrolling interests | $ | 11,189 | $ | 12,400 | |||
| Net income attributable to noncontrolling interests | 122 | 68 | |||||
| Citigroup’s net income | $ | 11,067 | $ | 12,332 | |||
| Income (loss) from discontinued operations, net of taxes | — | (229) | |||||
| Income from continuing operations—excluding noncontrolling interests | $ | 11,067 | $ | 12,561 | |||
| Adjustments to reconcile net income to net cash provided by (used in) operating activities <br>of continuing operations | |||||||
| Net loss (gain) on sale of significant disposals(1) | (1,462) | (616) | |||||
| Depreciation and amortization | 3,388 | 3,154 | |||||
| Deferred income taxes | (979) | (576) | |||||
| Provisions for credit losses and for benefits and claims(2) | 5,639 | 3,394 | |||||
| Realized gains from sales of investments | (151) | (74) | |||||
| Impairment losses on investments and other assets | 227 | 277 | |||||
| Goodwill impairment | — | 535 | |||||
| Change in trading account assets | (72,397) | (26,385) | |||||
| Change in trading account liabilities | (6,023) | 34,950 | |||||
| Change in brokerage receivables net of brokerage payables | (6,144) | 1,055 | |||||
| Change in loans held-for-sale (HFS) | 2,117 | 3,499 | |||||
| Change in other assets | (7,134) | (2,754) | |||||
| Change in other liabilities | (3,715) | 1,303 | |||||
| Other, net(2)(3) | 6,817 | (18,067) | |||||
| Total adjustments | $ | (79,817) | $ | (305) | |||
| Net cash provided by (used in) operating activities of continuing operations | $ | (68,750) | $ | 12,256 | |||
| Cash flows from investing activities of continuing operations | |||||||
| Change in securities borrowed and purchased under agreements to resell | $ | 30,342 | $ | (21,926) | |||
| Change in loans | (17,733) | (5,788) | |||||
| Proceeds from divestitures(1) | — | 3,242 | |||||
| Proceeds from sales and securitizations of loans | 3,397 | 3,077 | |||||
| Net payment due to transfer of net liabilities associated with divestitures(1) | (1,166) | — | |||||
| Available-for-sale (AFS) debt securities | |||||||
| Purchases of investments(2)(3) | (171,154) | (177,347) | |||||
| Proceeds from sales of investments | 35,580 | 86,454 | |||||
| Proceeds from maturities of investments(2)(3) | 149,049 | 102,857 | |||||
| Held-to-maturity (HTM) debt securities | |||||||
| Purchases of investments | (734) | (39,288) | |||||
| Proceeds from maturities of investments | 6,955 | 9,913 | |||||
| Capital expenditures on premises and equipment and capitalized software | (4,818) | (3,667) | |||||
| Proceeds from sales of premises and equipment and repossessed assets | 16 | 46 | |||||
| Other, net(2)(3) | 273 | (821) | |||||
| Net cash provided by (used in) investing activities of continuing operations | $ | 30,007 | $ | (43,248) | |||
| Cash flows from financing activities of continuing operations | |||||||
| Dividends paid | $ | (3,899) | $ | (3,777) | |||
| Issuance of preferred stock | 2,739 | — | |||||
| Redemption of preferred stock | (750) | — | |||||
| CONSOLIDATED STATEMENT OF CASH FLOWS | |||||||
| --- | --- | --- | --- | --- | |||
| (UNAUDITED) (Continued) | |||||||
| Nine Months Ended September 30, | |||||||
| In millions of dollars | 2023 | 2022 | |||||
| Treasury stock acquired | $ | (1,429) | $ | (3,250) | |||
| Stock tendered for payment of withholding taxes | (324) | (339) | |||||
| Change in securities loaned and sold under agreements to repurchase | 54,326 | 12,144 | |||||
| Issuance of long-term debt | 52,465 | 85,459 | |||||
| Payments and redemptions of long-term debt | (50,296) | (47,011) | |||||
| Change in deposits | (92,448) | 8,947 | |||||
| Change in short-term borrowings | (5,430) | 19,395 | |||||
| Net cash provided by (used in) financing activities of continuing operations | $ | (45,046) | $ | 71,568 | |||
| Effect of exchange rate changes on cash, due from banks and deposits with banks | $ | (4,249) | $ | (3,002) | |||
| Change in cash, due from banks and deposits with banks | (88,038) | 37,574 | |||||
| Cash, due from banks and deposits with banks at beginning of period | 342,025 | 262,033 | |||||
| Cash, due from banks and deposits with banks at end of period | $ | 253,987 | $ | 299,607 | |||
| Cash and due from banks (including segregated cash and other deposits) | $ | 26,548 | $ | 26,502 | |||
| Deposits with banks, net of allowance | 227,439 | 273,105 | |||||
| Cash, due from banks and deposits with banks at end of period | $ | 253,987 | $ | 299,607 | |||
| Supplemental disclosure of cash flow information for continuing operations | |||||||
| Cash paid during the period for income taxes | $ | 4,071 | $ | 2,684 | |||
| Cash paid during the period for interest | 51,873 | 12,557 | |||||
| Non-cash investing activities(1)(4)(5) | |||||||
| Transfer of investment securities from HTM to AFS | $ | 3,324 | $ | — | |||
| Transfer of investment securities from AFS to HTM | — | 21,688 | |||||
| Decrease in net loans associated with divestitures reclassified to HFS | — | 16,956 | |||||
| Decrease in goodwill associated with divestitures reclassified to HFS | — | 876 | |||||
| Transfers to loans HFS (Other assets) from loans HFI | 6,031 | 4,037 | |||||
| Transfers from loans HFS (Other assets) to loans HFI | 322 | — | |||||
| Non-cash financing activities(1)(5) | |||||||
| Decrease in deposits associated with divestitures reclassified to HFS | $ | — | $ | 19,691 | |||
| Non-cash redemption of preferred stock and increase in short-term borrowings | 1,500 | — |
(1) See Note 2 for further information on significant disposals.
(2) 2022 amounts have been revised to conform to the current-period presentation.
(3) Consistent with the revisions disclosed in “Statement of Cash Flows” in Note 1 to the Consolidated Financial Statements in Citi’s 2022 Form 10-K, during the nine months ended September 30, 2022, $16.1 billion of cash flows related to maturities of short-term negotiable certificates of deposit (NCDs) and $41 million of cash flows related to purchases of short-term NCDs were reclassified from purchases and maturities of AFS securities within investing activities to Other, net within operating activities.
(4) In January 2023, Citi adopted ASU 2022-01. Upon adoption, Citi transferred $3.3 billion of mortgage-backed securities from HTM classification to AFS classification as allowed under the ASU. At the time of transfer, the securities were in an unrealized gain position of $0.1 billion, which was recorded in AOCI upon transfer.
(5) Operating and finance lease right-of-use assets and lease liabilities represent non-cash investing and financing activities, respectively, and are not included in the non-cash investing activities presented here. See Note 25 for more information and balances as of September 30, 2023.
The Notes to the Consolidated Financial Statements are an integral part of these Consolidated Financial Statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION, UPDATED ACCOUNTING POLICIES AND ACCOUNTING CHANGES
Basis of Presentation
The accompanying unaudited Consolidated Financial Statements as of September 30, 2023 and for the three- and nine-month periods ended September 30, 2023 and 2022 include the accounts of Citigroup Inc. and its consolidated subsidiaries.
In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation have been reflected. The accompanying unaudited Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and related notes included within Citigroup’s Annual Report on Form 10-K for the year ended December 31, 2022 (2022 Form 10-K), Citigroup’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2023 (First Quarter of 2023 Form 10-Q) and Citigroup’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2023 (Second Quarter of 2023 Form 10-Q).
Certain financial information that is normally included in annual financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP), but is not required for interim reporting purposes, has been condensed or omitted.
Management must make estimates and assumptions that affect the Consolidated Financial Statements and the related footnote disclosures. While management uses its best judgment, actual results could differ from those estimates.
As noted above, the Notes to these Consolidated Financial Statements are unaudited.
Throughout these Notes, “Citigroup,” “Citi” and “the Company” refer to Citigroup Inc. and its consolidated subsidiaries.
Certain reclassifications and updates have been made to the prior periods’ financial statements and notes to conform to the current period’s presentation.
Cash equivalents are defined as those amounts included in Cash and due from banks and predominately all of Deposits with banks. Cash flows from risk management activities are classified in the same category as the related assets and liabilities. Amounts included in Cash and due from banks and Deposits with banks approximate fair value.
UPDATED SIGNIFICANT ACCOUNTING POLICIES
The accounting policies below have been updated from those disclosed in Citi’s 2022 Form 10-K for the effects of accounting standards adopted during the first quarter of 2023.
See Note 1 to the Consolidated Financial Statements in Citi’s 2022 Form 10-K for a summary of all of Citigroup’s significant accounting policies.
Allowances for Credit Losses (ACL)
Beginning January 1, 2023, Citi adopted the Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) No. 2022-02, Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures under the methodology described below. For information about Citi’s accounting for troubled debt restructurings (TDRs) prior to January 1, 2023, see Note 1 to the Consolidated Financial Statements in Citi’s 2022 Form 10-K.
ACCOUNTING CHANGES
TDRs and Vintage Disclosures
In March 2022, the FASB issued ASU No. 2022-02, Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. Citi adopted the ASU on January 1, 2023, including the guidance on the recognition and measurement of TDRs under the modified retrospective approach.
Adopting these amendments resulted in a decrease to the ACLL of $352 million and an increase in other assets related to held-for-sale businesses of $44 million, with a corresponding increase to retained earnings of $290 million and a decrease in deferred tax assets of $106 million on January 1, 2023. The ACL for corporate loans was unaffected because the measurement approach used for corporate loans is not in the scope of this ASU.
ASU 2022-02 eliminates the accounting and disclosure requirements for TDRs, including the requirement to measure the ACLL for TDRs using a discounted cash flow (DCF) approach. With the elimination of TDR accounting requirements, reasonably expected TDRs are no longer considered when determining the term over which to estimate expected credit losses. The ACLL for modified loans that are collateral dependent continues to be based on the fair value of the collateral.
Consumer Loans
Upon adoption of the ASU on January 1, 2023, Citi discontinued the use of a DCF approach for consumer loans formerly considered TDRs. Beginning January 1, 2023, Citi measures the ACLL for all consumer loans under approaches that do not incorporate discounting, primarily utilizing models that consider the borrowers’ probability of default, loss given default and exposure at default. In addition, upon adoption of the ASU, Citi collectively evaluates smaller-balance homogeneous loans formerly considered TDRs for expected
credit losses, whereas previously those loans had been individually evaluated.
The ASU also requires disclosure of modifications of loans to borrowers experiencing financial difficulty if the modification involves principal forgiveness, an interest rate reduction, an other-than-insignificant payment delay, a term extension or a combination of those types of modifications. In addition, the ASU requires the disclosure of current-period gross write-offs by year of loan origination (vintage). The amendments related to disclosures are required to be applied prospectively beginning as of the date of adoption. See Note 13 for these new disclosures for periods beginning on and after January 1, 2023.
Long-Duration Insurance Contracts
In August 2018, the FASB issued ASU No. 2018-12, Financial Services—Insurance: Targeted Improvements to the Accounting for Long-Duration Contracts, which changes the existing recognition, measurement, presentation and disclosures for long-duration contracts issued by an insurance entity. Specifically, the guidance (i) improves the timeliness of recognizing changes in the liability for future policy benefits and prescribes the rate used to discount future cash flows for long-duration insurance contracts, (ii) simplifies and improves the accounting for certain market-based options or guarantees associated with deposit (or account balance) contracts, (iii) simplifies the amortization of deferred acquisition costs and (iv) introduces additional quantitative and qualitative disclosures. Citi has certain insurance subsidiaries, primarily in Mexico, that issue long-duration insurance contracts such as traditional life insurance policies and life-contingent annuity contracts that are impacted by the requirements of ASU 2018-12.
Citi adopted the targeted improvements in ASU 2018-12 on January 1, 2023, resulting in a $39 million decrease in Other liabilities and a $27 million increase in AOCI, after-tax.
FUTURE ACCOUNTING CHANGES
Accounting for Investments in Tax Credit Structures
In March 2023, the FASB issued ASU No. 2023‐02, Investments—Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method. The ASU expands the scope of tax equity investments eligible to apply the proportional amortization method of accounting. Under the proportional amortization method, the cost of an eligible investment is amortized in proportion to the income tax credits and other income tax benefits that are received by the investor, with the amortization of the investment and the income tax credits being presented net in the income statement as components of income tax expense (benefit). The ASU will permit the Company to elect to use the proportional amortization method to account for all eligible tax equity investments, regardless of the tax credit program from which the income tax credits are received, if certain conditions are met. Citi plans to adopt the ASU on January 1, 2024 and does not expect a material impact to its results of operations as a result of adopting the standard.
Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions
In June 2022, the FASB issued ASU No. 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. The ASU was issued to address diversity in practice whereby certain entities included the impact of contractual restrictions when valuing equity securities, and it clarifies that a contractual restriction on the sale of an equity security should not be considered part of the unit of account of the equity security and, therefore, should not be considered in measuring fair value. The ASU also includes requirements for entities to disclose the fair value of equity securities subject to contractual sale restrictions, the nature and remaining duration of the restrictions and the circumstances that could cause a lapse in the restrictions.
The ASU will be effective for Citi on January 1, 2024 and is not expected to have an impact on Citi’s operating results or financial position.
2. DISCONTINUED OPERATIONS, SIGNIFICANT DISPOSALS AND OTHER BUSINESS EXITS
Summary of Discontinued Operations
The Company’s results from Discontinued operations consisted of residual activities related to the sales of 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 table summarizes financial information for all Discontinued operations:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||
|---|---|---|---|---|---|---|---|---|
| In millions of dollars | 2023 | 2022 | 2023 | 2022 | ||||
| Total revenues, net of interest expense | $ | — | $ | — | $ | — | $ | (262) |
| Income (loss) from discontinued operations | $ | 2 | $ | (6) | $ | — | $ | (270) |
| Benefit for income taxes | — | — | — | (41) | ||||
| Income (loss) from discontinued operations, net of taxes | $ | 2 | $ | (6) | $ | — | $ | (229) |
During the second quarter of 2022, the Company finalized the settlement of certain liabilities related to its legacy consumer operation in the U.K. (the legacy operation), including an indemnification liability related to its sale of the Egg Banking business in 2011, which led to the substantial liquidation of the legacy operation. As a result, a CTA loss (net of hedges) in AOCI of approximately $400 million pretax ($345 million after-tax) related to the legacy operation was released to earnings in the second quarter of 2022. Out of the total CTA release, a $260 million pretax loss ($221 million after-tax loss) was attributable to the Egg Banking business noted above, reported in Discontinued operations, and therefore the corresponding CTA release was also reported in Discontinued operations during the second quarter of 2022. The remaining CTA release of a $140 million pretax loss ($124 million after-tax loss) related to Legacy Holdings Assets was reported as part of Continuing operations within Legacy Franchises.
While the legacy operation was divested in multiple sales over the years, each transaction did not result in substantial liquidation given that Citi retained certain liabilities noted above, which were gradually settled over time until reaching the point of substantial liquidation during the second quarter of 2022, triggering the release of the CTA loss to earnings.
Cash flows from Discontinued operations were not material for the periods presented.
Significant Disposals
As of September 30, 2023, Citi had entered into sale agreements for nine consumer banking businesses within Legacy Franchises. Australia closed in the second quarter of 2022, the Philippines closed in the third quarter of 2022, Bahrain, Malaysia and Thailand closed in the fourth quarter of 2022, India and Vietnam closed in the first quarter of 2023 and Taiwan closed in the third quarter of 2023. Citi’s entry of sale agreement for the Indonesia consumer banking business has resulted in the reclassification to HFS on the Consolidated Balance Sheet of approximately $1 billion in assets within Other assets, including approximately $520 million of loans (net of allowance of $34 million), and approximately $1 billion in liabilities within Other liabilities, including approximately $900 million in deposits.
Of the nine sale agreements, the five below were identified as significant disposals. As of September 30, 2023, there were no remaining assets or liabilities included on Citi’s Consolidated Balance Sheet related to the significant disposals:
| Income (loss) before taxes(6) | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| In millions of dollars | Three Months Ended<br>September 30, | Nine Months Ended September 30, | ||||||||
| Consumer banking business in | Sale agreement date | Closing date | 2023 | 2022 | 2023 | 2022 | ||||
| Australia(1) | 8/9/2021 | 6/1/2022 | $ | — | $ | — | $ | — | $ | 193 |
| Philippines(2) | 12/23/2021 | 8/1/2022 | — | 7 | — | 72 | ||||
| Thailand(3) | 1/14/2022 | 11/1/2022 | — | 28 | — | 106 | ||||
| India(4) | 3/30/2022 | 3/1/2023 | — | 37 | 2 | 161 | ||||
| Taiwan(5) | 1/28/2022 | 8/12/2023 | (1) | 15 | 91 | 111 |
(1) On June 1, 2022, Citi completed the sale of its Australia consumer banking business, which was part of Legacy Franchises. The business had approximately $9.4 billion in assets, including $9.3 billion of loans (net of allowance of $140 million) and excluding goodwill. The total amount of liabilities was $7.3 billion, including $6.8 billion in deposits. The transaction generated a pretax loss on sale of approximately $760 million ($640 million after-tax), recorded in Other revenue. The loss on sale primarily reflected the impact of an approximate pretax $620 million CTA loss (net of hedges) ($470 million after-tax) already reflected in the AOCI component of equity. The sale closed on June 1, 2022, and the CTA-related balance was removed from AOCI, resulting in a neutral CTA impact to Citi’s CET1 Capital. The income before taxes shown in the above table for Australia reflects Citi’s ownership through June 1, 2022.
(2) On August 1, 2022, Citi completed the sale of its Philippines consumer banking business, which was part of Legacy Franchises. The business had approximately $1.8 billion in assets, including $1.2 billion of loans (net of allowance of $80 million) and excluding goodwill. The total amount of liabilities was $1.3 billion, including $1.2 billion in deposits. The sale resulted in a pretax gain on sale of approximately $618 million ($290 million after-tax), recorded in Other revenue. The income before taxes shown in the above table for the Philippines reflects Citi’s ownership through August 1, 2022.
(3) On November 1, 2022, Citi completed the sale of its Thailand consumer banking business, which was part of Legacy Franchises. The business had approximately $2.7 billion in assets, including $2.4 billion of loans (net of allowance of $67 million) and excluding goodwill. The total amount of liabilities was $1.0 billion, including $0.8 billion in deposits. The sale resulted in a pretax gain on sale of approximately $209 million ($115 million after-tax), recorded in Other revenue. The income before taxes shown in the above table for Thailand reflects Citi’s ownership through November 1, 2022.
(4) On March 1, 2023, Citi completed the sale of its India consumer banking business, which was part of Legacy Franchises. The business had approximately $5.2 billion in assets, including $3.4 billion of loans (net of allowance of $32 million) and excluding goodwill. The total amount of liabilities was $5.2 billion, including $5.1 billion in deposits. The sale resulted in a pretax gain on sale of approximately $1.1 billion ($727 million after-tax), recorded in Other revenue. The income before taxes shown in the above table for India reflects Citi’s ownership through March 1, 2023.
(5) On August 12, 2023, Citi completed the sale of its Taiwan consumer banking business, which was part of Legacy Franchises. The business had approximately $11.6 billion in assets, including $7.2 billion of loans (net of allowance of $92 million) and excluding goodwill. The total amount of liabilities was $9.2 billion, including $9.0 billion in deposits. The sale resulted in a pretax gain on sale of approximately $403 million ($284 million after-tax), subject to closing adjustments, recorded in Other revenue. The income before taxes shown in the above table for Taiwan reflects Citi’s ownership through August 12, 2023.
(6) Income before taxes for the period in which the individually significant component was classified as HFS for all prior periods presented. For Australia, excludes the pretax loss on sale. For the Philippines, Thailand, India and Taiwan, excludes the pretax gain on sale.
Citi did not have any other significant disposals as of September 30, 2023. As of November 3, 2023, Citi had not entered into sale agreements for the remaining Legacy Franchises businesses to be sold, specifically the Poland consumer banking business and the Mexico Consumer/SBMM businesses.
For a description of the Company’s significant disposal transactions in prior periods and financial impact, see Note 2 to the Consolidated Financial Statements in Citi’s 2022 Form 10-K.
Other Business Exits
Wind-Down of Korea Consumer Banking Business
On October 25, 2021, Citi disclosed its decision to wind down and close its Korea consumer banking business, which is reported in the Legacy Franchises operating segment. In connection with the announcement, Citibank Korea Inc. (CKI) commenced a voluntary early termination program (Korea VERP). Due to the voluntary nature of this termination program, no liabilities for termination benefits are recorded until CKI makes formal offers to employees that are then irrevocably accepted by those employees. Related charges are recorded as Compensation and benefits.
The following table summarizes the reserve charges related to the Korea VERP and other initiatives reported in the Legacy Franchises operating segment and Corporate/Other:
| In millions of dollars | Employee termination costs | |
|---|---|---|
| Total Citigroup (pretax) | ||
| Original charges in fourth quarter 2021 | $ | 1,052 |
| Utilization | (1) | |
| Foreign exchange | 3 | |
| Balance at December 31, 2021 | $ | 1,054 |
| Additional charges in first quarter 2022 | $ | 31 |
| Utilization | (347) | |
| Foreign exchange | (24) | |
| Balance at March 31, 2022 | $ | 714 |
| Additional charges (releases) | $ | (3) |
| Utilization | (670) | |
| Foreign exchange | (41) | |
| Balance at June 30, 2022 | $ | — |
Note: There were no additional charges after June 30, 2022.
The total cash charges for the wind-down were $1.1 billion through 2022, most of which were recognized in 2021. Citi does not expect to record any additional charges in connection with the Korea VERP.
See Note 8 to the Consolidated Financial Statements in Citi’s 2022 Form 10-K for details on the pension impact of the Korea wind-down.
Wind-Down of Russia Consumer and Institutional Banking Businesses
On August 25, 2022, Citi announced its decision to wind down its consumer banking and local commercial banking operations in Russia. As part of the wind-down, Citi is also actively pursuing sales of certain Russian consumer banking portfolios.
On October 14, 2022, Citi disclosed that it would end nearly all of the institutional banking services it offered in Russia by the end of the first quarter of 2023. Going forward, Citi’s only operations in Russia are those necessary to fulfill its remaining legal and regulatory obligations.
Portfolio Sales
•On December 12, 2022, Citi completed the sale of a portfolio of ruble-denominated personal installment loans, totaling approximately $240 million in outstanding loan balances, to Uralsib, a Russian commercial bank, resulting in a pretax net loss of approximately $12 million. The net loss on sale of the loan portfolio included a $32 million adjustment to record the loans at lower of cost or fair value recognized in Other revenue. In addition, the sale of the loans resulted in a release in the allowance for credit losses on loans of approximately $20 million recognized in the Provision for credit losses on loans.
•During the second quarter of 2023, Citi recorded an incremental gain of $5 million related to post-closing contingency payments for the previously disclosed personal installment loan sale in Other revenue. The previously disclosed sale of a portfolio of ruble-denominated personal installment loans resulted in a pretax net loss on sale of approximately $7 million.
•During the third quarter of 2023, as part of the previously disclosed cards referral agreement with a Russian bank, approximately $26 million of credit card receivables was settled upon referral and refinanced.
Wind-Down Charges
The following tables provide details on Citi’s Russia wind-down charges:
| Three Months Ended <br>September 30, 2023 | ||||||||
|---|---|---|---|---|---|---|---|---|
| In millions of dollars | ICG | Legacy Franchises | Corporate/Other | Total | ||||
| Severance(1) | $ | (2) | $ | (3) | $ | 1 | $ | (4) |
| Vendor termination and other costs(2) | — | 1 | — | 1 | ||||
| Total | $ | (2) | $ | (2) | $ | 1 | $ | (3) |
| Program-to-date <br>September 30, 2023 | ||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| In millions of dollars | ICG | Legacy Franchises | Corporate/Other | Total | ||||
| Severance(1) | $ | 8 | $ | 26 | $ | 3 | $ | 37 |
| Vendor termination and other costs(2) | — | 18 | — | 18 | ||||
| Total | $ | 8 | $ | 44 | $ | 3 | $ | 55 |
| Estimated additional charges <br>as of September 30, 2023 | ||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| In millions of dollars | ICG | Legacy Franchises | Corporate/Other | Total | ||||
| Severance(1) | $ | 10 | $ | 17 | $ | 10 | $ | 37 |
| Vendor termination and other costs(2) | — | 48 | — | 48 | ||||
| Total | $ | 10 | $ | 65 | $ | 10 | $ | 85 |
(1) Recorded in Compensation and benefits.
(2) Recorded in Other operating expenses.
3. OPERATING SEGMENTS
The operating segments and reporting units reflect how the CEO, who is the chief operating decision maker, manages the Company, including allocating resources and measuring performance.
Citigroup’s activities are conducted through three operating segments: Institutional Clients Group (ICG), Personal Banking and Wealth Management (PBWM) and Legacy Franchises, with Corporate/Other including activities not assigned to a specific operating segment, as well as discontinued operations.
ICG consists of Services, Markets and Banking, providing corporate, institutional and public sector clients around the world with a full range of wholesale banking products and services.
PBWM consists of U.S. Personal Banking and Global Wealth Management (Global Wealth), providing traditional banking services and credit cards to retail and small business customers primarily in the U.S., and financial services to clients from affluent to ultra-high-net-worth through banking, lending, mortgages, investment, custody and trust product offerings in 20 countries, including the U.S., Mexico and the four wealth management centers: Singapore, Hong Kong, the UAE and London.
Legacy Franchises consists of Asia Consumer and Mexico Consumer/SBMM businesses that Citi intends to exit, and its remaining Legacy Holdings Assets.
Corporate/Other includes activities not assigned to the operating segments, including certain unallocated costs of global functions, other corporate expenses and corporate treasury results, offsets to certain line-item reclassifications and eliminations and unallocated taxes, as well as discontinued operations.
Revenues and expenses directly associated with each respective business segment or component are included in determining respective operating results. Other revenues and expenses that are not directly attributable to a particular business segment or component are generally allocated from Corporate/Other based on respective net revenues, non-interest expenses or other relevant measures.
As a result of revenues and expenses from transactions with other operating segments or components being treated as transactions with external parties for purposes of segment disclosures, the Company includes intersegment eliminations within Corporate/Other to reconcile the business segment results to Citi’s consolidated results.
The accounting policies of these operating segments are the same as those disclosed in Note 1 to the Consolidated Financial Statements in Citi’s 2022 Form 10-K.
On September 13, 2023, Citi announced changes to its organizational structure, with the resulting operating segment impacts being implemented in the fourth quarter of 2023. The Company continues to execute requisite system and process changes that will enable the new segments to be operational in the fourth quarter of 2023. Citi expects to update its operating segment disclosures, including historical financial results, in the fourth quarter of 2023. These changes will not impact the previously reported consolidated financial results of the Company.
The following tables present certain information regarding the Company’s continuing operations by operating segment and Corporate/Other:
| Three Months Ended September 30, | |||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| In millions of dollars, except identifiable assets, average loans and average deposits in billions | ICG | PBWM | Legacy Franchises | Corporate/Other | Total Citi | ||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | ||||||||||||
| Net interest income | $ | 5,494 | $ | 4,570 | $ | 6,356 | $ | 5,836 | $ | 1,279 | $ | 1,385 | $ | 699 | $ | 772 | $ | 13,828 | $ | 12,563 | |
| Non-interest revenue | 5,150 | 4,898 | 422 | 351 | 938 | 1,169 | (199) | (473) | 6,311 | 5,945 | |||||||||||
| Total revenues, net of interest expense | $ | 10,644 | $ | 9,468 | $ | 6,778 | $ | 6,187 | $ | 2,217 | $ | 2,554 | $ | 500 | $ | 299 | $ | 20,139 | $ | 18,508 | |
| Operating expense | 7,179 | 6,541 | 4,301 | 4,077 | 1,794 | 1,845 | 237 | 286 | 13,511 | 12,749 | |||||||||||
| Provisions (releases) for credit losses | 196 | 86 | 1,457 | 1,109 | 188 | 167 | (1) | 3 | 1,840 | 1,365 | |||||||||||
| Income (loss) from continuing operations before taxes | $ | 3,269 | $ | 2,841 | $ | 1,020 | $ | 1,001 | $ | 235 | $ | 542 | $ | 264 | $ | 10 | $ | 4,788 | $ | 4,394 | |
| Provision (benefits) for income taxes | 804 | 655 | 217 | 209 | 108 | 226 | 74 | (211) | 1,203 | 879 | |||||||||||
| Income (loss) from continuing operations | $ | 2,465 | $ | 2,186 | $ | 803 | $ | 792 | $ | 127 | $ | 316 | $ | 190 | $ | 221 | $ | 3,585 | $ | 3,515 | |
| Identifiable assets (September 30, 2023 and December 31, 2022) | $ | 1,722 | $ | 1,730 | $ | 471 | $ | 494 | $ | 80 | $ | 97 | $ | 95 | $ | 96 | $ | 2,368 | $ | 2,417 | |
| Average loans | 278 | 291 | 347 | 325 | 37 | 39 | — | — | 662 | 655 | |||||||||||
| Average deposits | 821 | 817 | 421 | 428 | 52 | 50 | 21 | 21 | 1,315 | 1,316 | |||||||||||
| Nine Months Ended September 30, | |||||||||||||||||||||
| In millions of dollars, except average loans and average deposits in billions | ICG | PBWM | Legacy Franchises | Corporate/Other | Total Citi | ||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | ||||||||||||
| Net interest income | $ | 16,145 | $ | 12,874 | $ | 18,253 | $ | 16,790 | $ | 3,914 | $ | 4,367 | $ | 2,764 | $ | 1,367 | $ | 41,076 | $ | 35,398 | |
| Non-interest revenue | 16,173 | 19,173 | 1,368 | 1,331 | 3,078 | 2,053 | (673) | (623) | 19,946 | 21,934 | |||||||||||
| Total revenues, net of interest expense | $ | 32,318 | $ | 32,047 | $ | 19,621 | $ | 18,121 | $ | 6,992 | $ | 6,420 | $ | 2,091 | $ | 744 | $ | 61,022 | $ | 57,332 | |
| Operating expense | 21,438 | 19,698 | 12,759 | 11,951 | 5,324 | 5,952 | 849 | 706 | 40,370 | 38,307 | |||||||||||
| Provisions for credit losses | 182 | 855 | 4,627 | 2,088 | 833 | 448 | (3) | 3 | 5,639 | 3,394 | |||||||||||
| Income (loss) from continuing operations before taxes | $ | 10,698 | $ | 11,494 | $ | 2,235 | $ | 4,082 | $ | 835 | $ | 20 | $ | 1,245 | $ | 35 | $ | 15,013 | $ | 15,631 | |
| Provision (benefits) for income taxes | 2,716 | 2,672 | 449 | 877 | 224 | 104 | 435 | (651) | 3,824 | 3,002 | |||||||||||
| Income (loss) from continuing operations | $ | 7,982 | $ | 8,822 | $ | 1,786 | $ | 3,205 | $ | 611 | $ | (84) | $ | 810 | $ | 686 | $ | 11,189 | $ | 12,629 | |
| Average loans | $ | 280 | $ | 292 | $ | 340 | $ | 318 | $ | 37 | $ | 44 | $ | — | $ | — | $ | 657 | $ | 654 | |
| Average deposits | 837 | 824 | 429 | 437 | 51 | 52 | 22 | 11 | 1,339 | 1,324 |
4. INTEREST REVENUE AND EXPENSE
Interest revenue and Interest expense consisted of the following:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||
|---|---|---|---|---|---|---|---|---|
| In millions of dollars | 2023 | 2022 | 2023 | 2022 | ||||
| Interest revenue | ||||||||
| Consumer loans | $ | 9,609 | $ | 7,380 | $ | 27,195 | $ | 20,243 |
| Corporate loans | 5,432 | 3,403 | 15,186 | 8,750 | ||||
| Loan interest, including fees | $ | 15,041 | $ | 10,783 | $ | 42,381 | $ | 28,993 |
| Deposits with banks | 2,645 | 1,218 | 8,725 | 2,172 | ||||
| Securities borrowed and purchased under agreements to resell | 7,363 | 2,176 | 18,791 | 3,375 | ||||
| Investments, including dividends | 4,719 | 2,993 | 13,314 | 7,413 | ||||
| Trading account assets(1) | 3,893 | 1,989 | 10,391 | 4,794 | ||||
| Other interest-earning assets(2) | 1,176 | 760 | 3,277 | 1,953 | ||||
| Total interest revenue | $ | 34,837 | $ | 19,919 | $ | 96,879 | $ | 48,700 |
| Interest expense | ||||||||
| Deposits | $ | 9,630 | $ | 3,270 | $ | 26,065 | $ | 5,561 |
| Securities loaned and sold under agreements to repurchase | 6,090 | 1,251 | 14,609 | 2,188 | ||||
| Trading account liabilities(1) | 892 | 472 | 2,549 | 756 | ||||
| Short-term borrowings and other interest-bearing liabilities(3) | 1,956 | 745 | 5,382 | 1,068 | ||||
| Long-term debt | 2,441 | 1,618 | 7,198 | 3,729 | ||||
| Total interest expense | $ | 21,009 | $ | 7,356 | $ | 55,803 | $ | 13,302 |
| Net interest income | $ | 13,828 | $ | 12,563 | $ | 41,076 | $ | 35,398 |
| Provision for credit losses on loans | 1,816 | 1,328 | 5,314 | 2,972 | ||||
| Net interest income after provision for credit losses on loans | $ | 12,012 | $ | 11,235 | $ | 35,762 | $ | 32,426 |
(1)Interest expense on Trading account liabilities of ICG is reported as a reduction of Interest revenue. Interest revenue and Interest expense on cash collateral positions are reported in interest on Trading account assets and Trading account liabilities, respectively.
(2)Includes assets from businesses held-for-sale (see Note 2) and Brokerage receivables.
(3)Includes liabilities from businesses held-for-sale (see Note 2) and Brokerage payables.
5. COMMISSIONS AND FEES; ADMINISTRATION AND OTHER FIDUCIARY FEES
For additional information on Citi’s commissions and fees, and administration and other fiduciary fees, see Note 5 to the Consolidated Financial Statements in Citi’s 2022 Form 10-K.
The following tables present Commissions and fees revenue:
| Three Months Ended September 30, 2023 | Nine Months Ended September 30, 2023 | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| In millions of dollars | ICG | PBWM | Legacy Franchises | Total | ICG | PBWM | Legacy Franchises | Total | ||||||||
| Investment banking | $ | 694 | $ | — | $ | — | $ | 694 | $ | 2,018 | $ | — | $ | — | $ | 2,018 |
| Brokerage commissions | 368 | 176 | 21 | 565 | 1,142 | 535 | 99 | 1,776 | ||||||||
| Credit and bank card income | ||||||||||||||||
| Interchange fees | 356 | 2,507 | 152 | 3,015 | 1,050 | 7,409 | 485 | 8,944 | ||||||||
| Card-related loan fees | 16 | 36 | 71 | 123 | 46 | 116 | 198 | 360 | ||||||||
| Card rewards and partner payments(1) | (198) | (2,858) | (103) | (3,159) | (574) | (8,425) | (285) | (9,284) | ||||||||
| Deposit-related fees(2) | 284 | 32 | 9 | 325 | 808 | 90 | 26 | 924 | ||||||||
| Transactional service fees | 298 | 7 | 22 | 327 | 889 | 17 | 72 | 978 | ||||||||
| Corporate finance(3) | 89 | — | — | 89 | 274 | 3 | — | 277 | ||||||||
| Insurance distribution revenue | — | 64 | 13 | 77 | — | 183 | 74 | 257 | ||||||||
| Insurance premiums | — | 1 | 25 | 26 | — | 2 | 70 | 72 | ||||||||
| Loan servicing | 7 | 11 | 3 | 21 | 24 | 37 | 10 | 71 | ||||||||
| Other | 3 | 42 | 49 | 92 | 9 | 150 | 139 | 300 | ||||||||
| Total commissions and fees(4) | $ | 1,917 | $ | 18 | $ | 262 | $ | 2,195 | $ | 5,686 | $ | 117 | $ | 888 | $ | 6,693 |
| Three Months Ended September 30, 2022 | Nine Months Ended September 30, 2022 | |||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ||
| In millions of dollars | ICG | PBWM | Legacy Franchises | Total | ICG | PBWM | Legacy Franchises | Total | ||||||||
| Investment banking | $ | 725 | $ | — | $ | — | $ | 725 | $ | 2,477 | $ | — | $ | — | $ | 2,477 |
| Brokerage commissions | 356 | 167 | 48 | 571 | 1,209 | 621 | 169 | 1,999 | ||||||||
| Credit and bank card income | ||||||||||||||||
| Interchange fees | 330 | 2,420 | 199 | 2,949 | 891 | 6,954 | 647 | 8,492 | ||||||||
| Card-related loan fees | 12 | 64 | 66 | 142 | 32 | 201 | 226 | 459 | ||||||||
| Card rewards and partner payments(1) | (175) | (2,852) | (134) | (3,161) | (458) | (8,223) | (466) | (9,147) | ||||||||
| Deposit-related fees(2) | 262 | 25 | 13 | 300 | 807 | 128 | 49 | 984 | ||||||||
| Transactional service fees | 270 | 5 | 20 | 295 | 791 | 14 | 72 | 877 | ||||||||
| Corporate finance(3) | 87 | — | — | 87 | 339 | 3 | — | 342 | ||||||||
| Insurance distribution revenue | — | 57 | 33 | 90 | — | 165 | 102 | 267 | ||||||||
| Insurance premiums | — | 1 | 22 | 23 | — | 3 | 69 | 72 | ||||||||
| Loan servicing | 13 | 14 | 4 | 31 | 32 | 36 | 11 | 79 | ||||||||
| Other | 6 | 44 | 37 | 87 | 9 | 141 | 108 | 258 | ||||||||
| Total commissions and fees(4) | $ | 1,886 | $ | (55) | $ | 308 | $ | 2,139 | $ | 6,129 | $ | 43 | $ | 987 | $ | 7,159 |
(1)Citi’s consumer credit card programs have certain partner sharing agreements that vary by partner. These agreements are subject to contractually based performance thresholds that, if met, would require Citi to make ongoing payments to the partner. The threshold is based on the profitability of a program and is generally calculated based on predefined program revenues less predefined program expenses. In most of Citi’s partner sharing agreements, program expenses include net credit losses and, to the extent that an increase in net credit losses reduces Citi’s liability for the partners’ share for a given program year, would generally result in lower payments to partners in total for that year and vice versa. Further, in some instances, other partner payments are based on program sales and new account acquisitions.
(2)Overdraft fees are accounted for under ASC 310. Citi eliminated overdraft fees, returned item fees and overdraft protection fees beginning in June 2022. Includes overdraft fees (prior to the elimination of overdraft fees in June 2022) of $0 and $0 million for the three months ended September 30, 2023 and 2022, respectively, and $0 and $59 million for the nine months ended September 30, 2023 and 2022, respectively.
(3)Consists primarily of fees earned from structuring and underwriting loan syndications or related financing activity. This activity is accounted for under ASC 310.
(4)Commissions and fees include $(2,897) million and $(2,872) million not accounted for under ASC 606, Revenue from Contracts with Customers, for the three months ended September 30, 2023 and 2022, respectively, and $(8,497) million and $(8,115) million for the nine months ended September 30, 2023 and 2022, 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.
The following tables present Administration and other fiduciary fees revenue:
| Three Months Ended September 30, 2023 | Nine Months Ended September 30, 2023 | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| In millions of dollars | ICG | PBWM | Legacy Franchises | Total | ICG | PBWM | Legacy Franchises | Total | ||||||||
| Custody fees | $ | 447 | $ | 20 | $ | 2 | $ | 469 | $ | 1,349 | $ | 62 | $ | 13 | $ | 1,424 |
| Fiduciary fees | 73 | 199 | 98 | 370 | 217 | 537 | 270 | 1,024 | ||||||||
| Guarantee fees | 124 | 6 | 1 | 132 | 382 | 21 | 4 | 408 | ||||||||
| Total administration and other fiduciary fees(1) | $ | 644 | $ | 225 | $ | 101 | $ | 971 | $ | 1,948 | $ | 620 | $ | 287 | $ | 2,856 |
| Three Months Ended September 30, 2022 | Nine Months Ended September 30, 2022 | |||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| In millions of dollars | ICG | PBWM | Legacy Franchises | Total | ICG | PBWM | Legacy Franchises | Total | ||||||||
| Custody fees | $ | 422 | $ | 21 | $ | 2 | $ | 445 | $ | 1,375 | $ | 67 | $ | 7 | $ | 1,449 |
| Fiduciary fees | 78 | 179 | 77 | 334 | 210 | 580 | 236 | 1,026 | ||||||||
| Guarantee fees | 124 | 10 | 2 | 136 | 391 | 34 | 4 | 429 | ||||||||
| Total administration and other fiduciary fees(1) | $ | 624 | $ | 210 | $ | 81 | $ | 915 | $ | 1,976 | $ | 681 | $ | 247 | $ | 2,904 |
(1) Administration and other fiduciary fees include $132 million and $136 million for the three months ended September 30, 2023 and 2022, respectively, and $408 million and $429 million for the nine months ended September 30, 2023 and 2022, respectively, that are not accounted for under ASC 606, Revenue from Contracts with Customers. These generally include guarantee fees.
6. PRINCIPAL TRANSACTIONS
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 and characterized below based on the primary risk managed by each trading desk (as such, the trading desks can be periodically reorganized and thus the risk categories). Not included in the table below is the impact of net interest income related to trading activities, which is an integral part of trading activities’ profitability (see Note 4 for information about net interest income related to trading activities). Principal transactions include CVA (credit valuation adjustments) and FVA (funding valuation adjustments) on over-the-counter derivatives, and gains (losses) on certain economic hedges on loans in ICG. These adjustments are discussed further in Note 22.
In certain transactions, Citi incurs fees and presents these fees paid to third parties in operating expenses.
The following table presents Principal transactions revenue:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||
|---|---|---|---|---|---|---|---|---|
| In millions of dollars | 2023 | 2022 | 2023 | 2022 | ||||
| Interest rate risks(1) | $ | 955 | $ | 458 | $ | 2,926 | $ | 3,143 |
| Foreign exchange risks(2) | 1,295 | 1,555 | 4,125 | 4,978 | ||||
| Equity risks(3) | 308 | 411 | 1,147 | 1,687 | ||||
| Commodity and other risks(4) | 475 | 404 | 1,443 | 1,466 | ||||
| Credit products and risks(5) | (25) | (203) | (166) | 466 | ||||
| Total | $ | 3,008 | $ | 2,625 | $ | 9,475 | $ | 11,740 |
(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
For additional information on Citi’s incentive plans, see Note 7 to the Consolidated Financial Statements in Citi’s 2022 Form 10-K.
8. RETIREMENT BENEFITS
For additional information on Citi’s retirement benefits, see Note 8 to the Consolidated Financial Statements in Citi’s 2022 Form 10-K.
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. Benefits earned during the period are reported in Compensation and benefits expenses and all other components of the net period benefit cost are reported in Other operating expenses in the Consolidated Statement of Income:
| Three Months Ended September 30, | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Pension plans | Postretirement benefit plans | |||||||||||||||
| U.S. plans | Non-U.S. plans | U.S. plans | Non-U.S. plans | |||||||||||||
| In millions of dollars | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | ||||||||
| Service cost | $ | — | $ | — | $ | 29 | $ | 26 | $ | — | $ | — | $ | — | $ | 1 |
| Interest cost on benefit obligation | 124 | 120 | 105 | 91 | 4 | 4 | 27 | 21 | ||||||||
| Expected return on assets | (160) | (153) | (84) | (64) | (3) | (3) | (20) | (16) | ||||||||
| Amortization of unrecognized: | ||||||||||||||||
| Prior service (benefit) | — | — | (1) | (2) | (2) | (2) | (2) | (2) | ||||||||
| Net actuarial loss (gain) | 39 | 36 | 20 | 16 | (3) | (2) | (4) | 2 | ||||||||
| Settlement loss(1) | — | — | 5 | — | — | — | — | — | ||||||||
| Total net expense (benefit) | $ | 3 | $ | 3 | $ | 74 | $ | 67 | $ | (4) | $ | (3) | $ | 1 | $ | 6 |
(1) Settlement relates to divestiture and wind-down activities.
| Nine Months Ended September 30, | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Pension plans | Postretirement benefit plans | |||||||||||||||
| U.S. plans | Non-U.S. plans | U.S. plans | Non-U.S. plans | |||||||||||||
| In millions of dollars | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | ||||||||
| Service cost | $ | — | $ | — | $ | 87 | $ | 90 | $ | — | $ | — | $ | 1 | $ | 2 |
| Interest cost on benefit obligation | 374 | 311 | 305 | 243 | 13 | 11 | 79 | 67 | ||||||||
| Expected return on assets | (481) | (461) | (247) | (196) | (10) | (9) | (59) | (54) | ||||||||
| Amortization of unrecognized: | ||||||||||||||||
| Prior service cost (benefit) | 1 | 1 | (4) | (5) | (7) | (7) | (6) | (6) | ||||||||
| Net actuarial loss (gain) | 118 | 136 | 54 | 43 | (8) | (5) | (14) | 4 | ||||||||
| Curtailment (gain)(1) | — | — | (8) | (23) | — | — | — | — | ||||||||
| Settlement loss (gain)(1) | — | — | 9 | (10) | — | — | — | — | ||||||||
| Total net expense (benefit) | $ | 12 | $ | (13) | $ | 196 | $ | 142 | $ | (12) | $ | (10) | $ | 1 | $ | 13 |
(1) Curtailment and settlement relate to divestiture and wind-down activities. 2022 includes gains due to curtailment and settlement relating to divestiture activities. Total net expense for non-U.S. plans includes a $36 million net benefit related to the wind-down of Citi’s consumer banking business in Korea.
Funded Status and Accumulated Other Comprehensive Income (AOCI)
The following table summarizes the funded status and amounts recognized on the Consolidated Balance Sheet for the Company’s Significant Plans:
| Nine Months Ended September 30, 2023 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Pension plans | Postretirement benefit plans | |||||||
| In millions of dollars | U.S. plans | Non-U.S. plans | U.S. plans | Non-U.S. plans | ||||
| Change in projected benefit obligation | ||||||||
| Projected benefit obligation at beginning of year | $ | 9,741 | $ | 6,375 | $ | 375 | $ | 1,013 |
| Plans measured annually | (19) | (1,774) | — | (193) | ||||
| Projected benefit obligation at beginning of year—Significant Plans | $ | 9,722 | $ | 4,601 | $ | 375 | $ | 820 |
| First-quarter activity | 160 | 241 | (1) | 70 | ||||
| Second-quarter activity | (265) | 179 | (27) | 75 | ||||
| Projected benefit obligation at June 30, 2023—Significant Plans | $ | 9,617 | $ | 5,021 | $ | 347 | $ | 965 |
| Service cost | — | 12 | — | — | ||||
| Interest cost on benefit obligation | 124 | 86 | 4 | 24 | ||||
| Actuarial (gain)(4) | (435) | (264) | (17) | (95) | ||||
| Benefits paid, net of participants’ contributions | (217) | (85) | (11) | (18) | ||||
| Foreign exchange impact and other | — | (91) | — | (15) | ||||
| Projected benefit obligation at period end—Significant Plans | $ | 9,089 | $ | 4,679 | $ | 323 | $ | 861 |
| Change in plan assets | ||||||||
| Plan assets at fair value at beginning of year | $ | 10,145 | $ | 6,086 | $ | 253 | $ | 855 |
| Plans measured annually | — | (1,226) | — | (7) | ||||
| Plan assets at fair value at beginning of year—Significant Plans | $ | 10,145 | $ | 4,860 | $ | 253 | $ | 848 |
| First-quarter activity | 143 | 225 | 5 | 73 | ||||
| Second-quarter activity | (131) | (6) | (2) | 24 | ||||
| Plan assets at fair value at June 30, 2023—Significant Plans | $ | 10,157 | $ | 5,079 | $ | 256 | $ | 945 |
| Actual return on plan assets | (215) | (113) | (3) | (29) | ||||
| Company contributions, net of reimbursements | 15 | 8 | (20) | — | ||||
| Benefits paid, net of participants’ contributions | (217) | (85) | (11) | (18) | ||||
| Foreign exchange impact and other | — | (91) | — | (16) | ||||
| Plan assets at fair value at period end—Significant Plans | $ | 9,740 | $ | 4,798 | $ | 222 | $ | 882 |
| Qualified plans(1) | $ | 1,144 | $ | 119 | $ | (101) | $ | 21 |
| Nonqualified plans(2) | (493) | — | — | — | ||||
| Funded status of the plans at period end—Significant Plans | $ | 651 | $ | 119 | $ | (101) | $ | 21 |
| Net amount recognized at period end | ||||||||
| Benefit asset | $ | 1,144 | $ | 738 | $ | — | $ | 21 |
| Benefit liability | (493) | (619) | (101) | — | ||||
| Net amount recognized on the balance sheet—Significant Plans | $ | 651 | $ | 119 | $ | (101) | $ | 21 |
| Amounts recognized in AOCI at period end(3) | ||||||||
| Prior service (expense) benefit | $ | — | $ | (3) | $ | 75 | $ | 34 |
| Net actuarial (loss) gain | (6,244) | (1,438) | 136 | (281) | ||||
| Net amount recognized in equity (pretax)—Significant Plans | $ | (6,244) | $ | (1,441) | $ | 211 | $ | (247) |
| Accumulated benefit obligation at period end—Significant Plans | $ | 9,089 | $ | 4,501 | $ | 323 | $ | 861 |
(1)The U.S. qualified pension plan is fully funded under specified Employee Retirement Income Security Act of 1974, as amended (ERISA), funding rules as of January 1, 2023 and no minimum required funding is expected for 2023.
(2)The nonqualified plans of the Company are unfunded.
(3)The framework for the Company’s pension oversight process includes monitoring of potential settlement charges for all plans. Settlement accounting is triggered when either the sum of all settlements (including lump-sum payments) for the year is greater than service plus interest costs or if more than 10% of the plan’s projected benefit obligation will be settled. Because some of Citi’s significant plans are frozen and have no material service cost, settlement accounting may apply in the future.
(4)During 2023, the actuarial gain is primarily due to the increase in global discount rates.
The following table presents the change in AOCI related to the Company’s pension, postretirement and post employment plans:
| In millions of dollars | Three Months Ended<br>September 30, 2023 | Nine Months Ended September 30, 2023 | Three Months Ended September 30, 2022 | Nine Months Ended September 30, 2022 | ||||
|---|---|---|---|---|---|---|---|---|
| Beginning of period balance, net of tax(1)(2) | $ | (5,995) | $ | (5,755) | $ | (5,770) | $ | (5,852) |
| Actuarial assumptions changes and plan experience | 818 | 703 | 977 | 4,001 | ||||
| Net asset (loss) due to difference between actual and expected returns | (614) | (676) | (1,084) | (4,221) | ||||
| Net amortization | 47 | 135 | 43 | 159 | ||||
| Curtailment/settlement loss (gain)(3) | 5 | 1 | — | (32) | ||||
| Foreign exchange impact and other | 124 | (95) | 60 | 193 | ||||
| Change in deferred taxes, net | (68) | 4 | 41 | 19 | ||||
| Change, net of tax | $ | 312 | $ | 72 | $ | 37 | $ | 119 |
| End of period balance, net of tax(1)(2) | $ | (5,683) | $ | (5,683) | $ | (5,733) | $ | (5,733) |
(1)See Note 18 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 divestiture activities, including $36 million related to the Korea wind-down in the nine-month period ended September 30, 2022.
Plan Assumptions
Certain assumptions used in determining pension and postretirement benefit obligations and net benefit expense for the Significant Plans are as follows:
| During the period | Three Months Ended | |||||
|---|---|---|---|---|---|---|
| Sept. 30, 2023 | Jun. 30, 2023 | Sept. 30, 2022 | ||||
| Discount rate | ||||||
| U.S. plans | ||||||
| Qualified pension | 5.40% | 5.15% | 4.80% | |||
| Nonqualified pension | 5.45 | 5.20 | 4.80 | |||
| Postretirement | 5.50 | 5.25 | 4.75 | |||
| Non-U.S. plans | ||||||
| Pension | 1.80–10.40 | 2.05–10.65 | 2.00–10.75 | |||
| Weighted average | 7.72 | 7.64 | 6.68 | |||
| Postretirement | 10.40 | 10.70 | 10.75 | |||
| Expected return on assets | ||||||
| U.S. plans | ||||||
| Qualified pension | 5.70 | 5.70 | 5.00 | |||
| Postretirement | 5.70/3.00 | 5.70/3.00 | 5.00/1.50 | |||
| Non-U.S. plans | ||||||
| Pension | 4.50–9.90 | 4.10–9.90 | 2.00–8.00 | |||
| Weighted average | 6.56 | 6.26 | 4.72 | |||
| Postretirement | 8.70 | 8.70 | 8.00 | |||
| At period ended(1) | Sept. 30, 2023 | Jun. 30, 2023 | Sept. 30, 2022 | |||
| --- | --- | --- | --- | |||
| Discount rate | ||||||
| U.S. plans | ||||||
| Qualified pension | 6.05% | 5.40% | 5.65% | |||
| Nonqualified pension | 6.10 | 5.45 | 5.60 | |||
| Postretirement | 6.10 | 5.50 | 5.65 | |||
| Non-U.S. plans | ||||||
| Pension | 1.85–11.55 | 1.80–10.40 | 2.10–11.30 | |||
| Weighted average | 8.35 | 7.72 | 7.64 | |||
| Postretirement | 11.55 | 10.40 | 11.25 | |||
| Expected return on assets | ||||||
| U.S. plans | ||||||
| Qualified pension | 5.70 | 5.70 | 5.00 | |||
| Postretirement | 5.70/3.00 | 5.70/3.00 | 5.00/1.50 | |||
| Non-U.S. plans | ||||||
| Pension | 4.50–9.90 | 4.50–9.90 | 2.00–8.00 | |||
| Weighted average | 6.70 | 6.56 | 5.48 | |||
| Postretirement | 8.70 | 8.70 | 8.00 |
(1) The assumptions for the discount rate and expected return on assets at the end of each quarter are used in the following quarter.
Sensitivities of Certain Key Assumptions
The following table summarizes the estimated effect on the Company’s Significant Plans quarterly net expense (benefit) of a one-percentage-point change in the discount rate:
| Three Months Ended September 30, 2023 | ||||
|---|---|---|---|---|
| In millions of dollars | One-percentage-point increase | One-percentage-point decrease | ||
| Pension | ||||
| U.S. plans | $ | 6 | $ | (7) |
| Non-U.S. plans | (2) | 3 | ||
| Postretirement | ||||
| Non-U.S. plans | (1) | 1 |
Contributions
For the U.S. pension plans, there were no required minimum cash contributions during the first nine months of 2023.
The following table summarizes the Company’s actual contributions for the nine months ended September 30, 2023 and 2022, as well as expected Company contributions for the remainder of 2023 and the actual contributions made in 2022:
| Pension plans | Postretirement plans | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| U.S. plans(1) | Non-U.S. plans | U.S. plans | Non-U.S. plans | |||||||||||||
| In millions of dollars | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | ||||||||
| Company contributions(2)(3) for the nine months ended September 30 | $ | 43 | $ | 41 | $ | 87 | $ | 417 | $ | — | $ | 5 | $ | 7 | $ | 7 |
| Company contributions made during the remainder of the year(3) | — | 14 | — | 77 | — | 9 | — | 2 | ||||||||
| Company contributions expected to be made during the remainder of the year | 16 | — | 25 | — | 1 | — | 2 | — |
(1)The U.S. plans include benefits paid directly by the Company for the nonqualified pension plans.
(2)Company contributions are composed of cash contributions made to the plans and benefits paid directly by the Company.
(3)2022 benefit payments increased due to the wind-down of Citi’s consumer banking business in Korea.
Defined Contribution Plans
The following table summarizes the Company’s contributions for the defined contribution plans:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||
|---|---|---|---|---|---|---|---|---|
| In millions of dollars | 2023 | 2022 | 2023 | 2022 | ||||
| U.S. plans | $ | 138 | $ | 119 | $ | 413 | $ | 356 |
| Non-U.S. plans | 114 | 98 | 342 | 303 |
Post Employment Plans
The following table summarizes the net expense recognized in the Consolidated Statement of Income for the Company’s U.S. post employment plans:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||
|---|---|---|---|---|---|---|---|---|
| In millions of dollars | 2023 | 2022 | 2023 | 2022 | ||||
| Service-related expense | ||||||||
| Amortization of unrecognized: | ||||||||
| Net actuarial loss | $ | 1 | $ | 1 | $ | 2 | $ | 2 |
| Total service-related expense | $ | 1 | $ | 1 | $ | 2 | $ | 2 |
| Non-service-related expense | 5 | 2 | 10 | 8 | ||||
| Total net expense | $ | 6 | $ | 3 | $ | 12 | $ | 10 |
9. EARNINGS PER SHARE
The following table reconciles the income and share data used in the basic and diluted earnings per share (EPS) computations:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||
|---|---|---|---|---|---|---|---|---|
| In millions of dollars, except per share amounts | 2023 | 2022 | 2023 | 2022 | ||||
| Earnings per common share | ||||||||
| Income from continuing operations before attribution of noncontrolling interests | $ | 3,585 | $ | 3,515 | $ | 11,189 | $ | 12,629 |
| Less: Noncontrolling interests from continuing operations | 41 | 30 | 122 | 68 | ||||
| Net income from continuing operations (for EPS purposes) | $ | 3,544 | $ | 3,485 | $ | 11,067 | $ | 12,561 |
| Income (loss) from discontinued operations, net of taxes | 2 | (6) | — | (229) | ||||
| Citigroup’s net income | $ | 3,546 | $ | 3,479 | $ | 11,067 | $ | 12,332 |
| Less: Preferred dividends | 333 | 277 | 898 | 794 | ||||
| Net income available to common shareholders | $ | 3,213 | $ | 3,202 | $ | 10,169 | $ | 11,538 |
| Less: Dividends and undistributed earnings allocated to employee restricted and deferred shares with rights to dividends, and other relevant items(1), applicable to basic EPS | 53 | 28 | 121 | 89 | ||||
| Net income allocated to common shareholders for basic EPS | $ | 3,160 | $ | 3,174 | $ | 10,048 | $ | 11,449 |
| Weighted-average common shares outstanding applicable to basic EPS (in millions) | 1,924.4 | 1,936.8 | 1,936.9 | 1,950.0 | ||||
| Basic earnings per share(2) | ||||||||
| Income from continuing operations | $ | 1.64 | $ | 1.64 | $ | 5.19 | $ | 5.99 |
| Discontinued operations | — | — | — | (0.12) | ||||
| Net income per share—basic | $ | 1.64 | $ | 1.64 | $ | 5.19 | $ | 5.87 |
| Diluted earnings per share | ||||||||
| Net income allocated to common shareholders for basic EPS | $ | 3,160 | $ | 3,174 | $ | 10,048 | $ | 11,449 |
| Add back: Dividends allocated to employee restricted and deferred shares with rights to dividends that are forfeitable | 16 | 11 | 42 | 30 | ||||
| Net income allocated to common shareholders for diluted EPS | $ | 3,176 | $ | 3,185 | $ | 10,090 | $ | 11,479 |
| Weighted-average common shares outstanding applicable to basic EPS (in millions) | 1,924.4 | 1,936.8 | 1,936.9 | 1,950.0 | ||||
| Effect of dilutive securities | ||||||||
| Options(3) | — | — | — | — | ||||
| Other employee plans | 27.3 | 18.3 | 24.6 | 17.1 | ||||
| Adjusted weighted-average common shares outstanding applicable to diluted EPS<br><br>(in millions)(4) | 1,951.7 | 1,955.1 | 1,961.5 | 1,967.1 | ||||
| Diluted earnings per share(2) | ||||||||
| Income from continuing operations | $ | 1.63 | $ | 1.63 | $ | 5.14 | $ | 5.95 |
| Discontinued operations | — | — | — | (0.12) | ||||
| Net income per share—diluted(5) | $ | 1.63 | $ | 1.63 | $ | 5.14 | $ | 5.84 |
(1)Other relevant items includes issuance costs of $16 million related to the redemption of preferred stock Series A and B in the third quarter of 2023. These issuance costs were reclassified from Additional paid-in capital to Retained earnings upon redemption of the preferred stock. See Note 19.
(2)Due to rounding, earnings per share on continuing operations and discontinued operations may not sum to earnings per share on net income.
(3) During the third quarters of 2023 and 2022, no significant options to purchase shares of common stock were outstanding.
(4) Due to rounding, weighted-average common shares outstanding applicable to basic EPS and the effect of dilutive securities may not sum to weighted-average common shares outstanding applicable to diluted EPS.
(5) Due to rounding, income from continuing operations and discontinued operations may not sum to net income per share—diluted.
10. SECURITIES BORROWED, LOANED AND SUBJECT TO REPURCHASE AGREEMENTS
For additional information on the Company’s resale and repurchase agreements and securities borrowing and lending agreements, see Note 11 to the Consolidated Financial Statements in Citi’s 2022 Form 10-K.
Securities borrowed and purchased under agreements to resell, at their respective carrying values, consisted of the following:
| In millions of dollars | September 30,<br>2023 | December 31, 2022 | ||
|---|---|---|---|---|
| Securities purchased under agreements to resell | $ | 264,838 | $ | 291,272 |
| Deposits paid for securities borrowed | 70,274 | 74,165 | ||
| Total, net(1) | $ | 335,112 | $ | 365,437 |
| Allowance for credit losses on securities purchased and borrowed(2) | (53) | (36) | ||
| Total, net of allowance | $ | 335,059 | $ | 365,401 |
Securities loaned and sold under agreements to repurchase, at their respective carrying values, consisted of the following:
| In millions of dollars | September 30,<br>2023 | December 31, 2022 | ||
|---|---|---|---|---|
| Securities sold under agreements to repurchase | $ | 242,611 | $ | 183,827 |
| Deposits received for securities loaned | 14,159 | 18,617 | ||
| Total, net(1) | $ | 256,770 | $ | 202,444 |
(1) The above tables do not include securities-for-securities lending transactions of $7.2 billion and $4.4 billion at September 30, 2023 and December 31, 2022, 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.
(2) See Note 14 for further information.
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.
A substantial portion of the resale and repurchase agreements is recorded at fair value as the Company elected the fair value option, as described in Notes 22 and 23. The remaining portion is carried at the amount of cash initially advanced or received, plus accrued interest, as specified in the respective agreements.
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 23. 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 posts or obtains additional collateral in order to maintain contractual margin protection.
The following tables present the gross and net resale and repurchase agreements and securities borrowing and lending agreements and the related offsetting amounts 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 has 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 September 30, 2023 | ||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| In millions of dollars | Gross amounts<br>of recognized<br>assets | Gross amounts<br>offset on the<br>Consolidated<br>Balance Sheet(1) | Net amounts of<br>assets included on<br>the Consolidated<br>Balance Sheet | Amounts<br>not offset on the<br>Consolidated Balance<br>Sheet but eligible for<br>offsetting upon<br>counterparty default(2) | Net<br>amounts(3) | |||||||||||||||||
| Securities purchased under agreements to resell | $ | 499,862 | $ | 235,024 | $ | 264,838 | $ | 239,448 | $ | 25,390 | ||||||||||||
| Deposits paid for securities borrowed | 85,480 | 15,206 | 70,274 | 18,388 | 51,886 | |||||||||||||||||
| Total | $ | 585,342 | $ | 250,230 | $ | 335,112 | $ | 257,836 | $ | 77,276 | ||||||||||||
| In millions of dollars | Gross amounts<br>of recognized<br>liabilities | Gross amounts<br>offset on the<br>Consolidated<br>Balance Sheet(1) | Net amounts of<br>liabilities included on<br>the Consolidated<br>Balance Sheet | Amounts<br>not offset on the<br>Consolidated Balance<br>Sheet but eligible for<br>offsetting upon<br>counterparty default(2) | Net amounts(3) | |||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||||||||||
| Securities sold under agreements to repurchase | $ | 477,635 | $ | 235,024 | $ | 242,611 | $ | 155,168 | $ | 87,443 | ||||||||||||
| Deposits received for securities loaned | 29,365 | 15,206 | 14,159 | 3,877 | 10,282 | |||||||||||||||||
| Total | $ | 507,000 | $ | 250,230 | $ | 256,770 | $ | 159,045 | $ | 97,725 | As of December 31, 2022 | |||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||||||||||
| In millions of dollars | Gross amounts<br>of recognized<br>assets | Gross amounts<br>offset on the<br>Consolidated<br>Balance Sheet(1) | Net amounts of<br>assets included on<br>the Consolidated<br>Balance Sheet | Amounts<br>not offset on the<br>Consolidated Balance<br>Sheet but eligible for<br>offsetting upon<br>counterparty default(2) | Net<br>amounts(3) | |||||||||||||||||
| Securities purchased under agreements to resell | $ | 403,663 | $ | 112,391 | $ | 291,272 | $ | 204,077 | $ | 87,195 | ||||||||||||
| Deposits paid for securities borrowed | 88,817 | 14,652 | 74,165 | 13,844 | 60,321 | |||||||||||||||||
| Total | $ | 492,480 | $ | 127,043 | $ | 365,437 | $ | 217,921 | $ | 147,516 | In millions of dollars | Gross amounts<br>of recognized<br>liabilities | Gross amounts<br>offset on the<br>Consolidated<br>Balance Sheet(1) | Net amounts of<br>liabilities included on<br>the Consolidated<br>Balance Sheet | Amounts<br>not offset on the<br>Consolidated Balance<br>Sheet but eligible for<br>offsetting upon<br>counterparty default(2) | Net<br>amounts(3) | ||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||||||||||
| Securities sold under agreements to repurchase | $ | 296,218 | $ | 112,391 | $ | 183,827 | $ | 71,635 | $ | 112,192 | ||||||||||||
| Deposits received for securities loaned | 33,269 | 14,652 | 18,617 | 2,542 | 16,075 | |||||||||||||||||
| Total | $ | 329,487 | $ | 127,043 | $ | 202,444 | $ | 74,177 | $ | 128,267 |
(1)Includes financial instruments subject to enforceable master netting agreements that are permitted to be offset under ASC 210-20-45.
(2)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.
(3)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 amounts of liabilities associated with repurchase agreements and securities lending agreements by remaining contractual maturity:
| As of September 30, 2023 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 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 | $ | 248,681 | $ | 142,516 | $ | 29,711 | $ | 56,727 | $ | 477,635 |
| Deposits received for securities loaned | 20,634 | 242 | 556 | 7,933 | 29,365 | |||||
| Total | $ | 269,315 | $ | 142,758 | $ | 30,267 | $ | 64,660 | $ | 507,000 |
| As of December 31, 2022 | ||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| 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 | $ | 138,710 | $ | 86,819 | $ | 25,119 | $ | 45,570 | $ | 296,218 |
| Deposits received for securities loaned | 25,388 | 267 | 2,121 | 5,493 | 33,269 | |||||
| Total | $ | 164,098 | $ | 87,086 | $ | 27,240 | $ | 51,063 | $ | 329,487 |
The following tables present the gross amounts of liabilities associated with repurchase agreements and securities lending agreements by class of underlying collateral:
| As of September 30, 2023 | ||||||
|---|---|---|---|---|---|---|
| In millions of dollars | Repurchase agreements | Securities lending agreements | Total | |||
| U.S. Treasury and federal agency securities | $ | 191,944 | $ | — | $ | 191,944 |
| State and municipal securities | 1,434 | 2 | 1,436 | |||
| Foreign government securities | 161,785 | 626 | 162,411 | |||
| Corporate bonds | 15,761 | 23 | 15,784 | |||
| Equity securities | 15,478 | 28,228 | 43,706 | |||
| Mortgage-backed securities | 67,390 | — | 67,390 | |||
| Other | 23,843 | 486 | 24,329 | |||
| Total | $ | 477,635 | $ | 29,365 | $ | 507,000 |
| As of December 31, 2022 | ||||||
| --- | --- | --- | --- | --- | --- | --- |
| In millions of dollars | Repurchase agreements | Securities lending agreements | Total | |||
| U.S. Treasury and federal agency securities | $ | 99,979 | $ | 106 | $ | 100,085 |
| State and municipal securities | 1,911 | — | 1,911 | |||
| Foreign government securities | 123,826 | 13 | 123,839 | |||
| Corporate bonds | 14,308 | 45 | 14,353 | |||
| Equity securities | 9,749 | 33,096 | 42,845 | |||
| Mortgage-backed securities | 36,225 | — | 36,225 | |||
| Asset-backed securities | 1,755 | — | 1,755 | |||
| Other | 8,465 | 9 | 8,474 | |||
| Total | $ | 296,218 | $ | 33,269 | $ | 329,487 |
11. 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.
For additional information on these receivables and payables, see Note 12 to the Consolidated Financial Statements in Citi’s 2022 Form 10-K.
Brokerage receivables and Brokerage payables consisted of the following:
| In millions of dollars | September 30,<br>2023 | December 31, 2022 | ||
|---|---|---|---|---|
| Receivables from customers | $ | 22,854 | $ | 15,462 |
| Receivables from brokers, dealers and clearing organizations | 43,340 | 38,730 | ||
| Total brokerage receivables(1) | $ | 66,194 | $ | 54,192 |
| Payables to customers | $ | 53,441 | $ | 55,747 |
| Payables to brokers, dealers and clearing organizations | 21,635 | 13,471 | ||
| Total brokerage payables(1) | $ | 75,076 | $ | 69,218 |
(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.
12. INVESTMENTS
For additional information regarding Citi’s investment portfolios, including evaluating investments for impairment, see Note 13 to the Consolidated Financial Statements
in Citi’s 2022 Form 10-K.
The following table presents Citi’s investments by category:
| In millions of dollars | September 30,<br>2023 | December 31, 2022 | ||
|---|---|---|---|---|
| Debt securities available-for-sale (AFS) | $ | 241,783 | $ | 249,679 |
| Debt securities held-to-maturity (HTM)(1) | 259,456 | 268,863 | ||
| Marketable equity securities carried at fair value(2) | 283 | 429 | ||
| Non-marketable equity securities carried at fair value(2)(5) | 455 | 466 | ||
| Non-marketable equity securities measured using the measurement alternative(3) | 1,621 | 1,676 | ||
| Non-marketable equity securities carried at cost(4) | 5,400 | 5,469 | ||
| Total investments(6) | $ | 508,998 | $ | 526,582 |
(1)Carried at adjusted amortized cost basis, net of any ACL.
(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. See “Non-Marketable Equity Securities Not Carried at Fair Value” below.
(4) Represents shares issued by the Federal Reserve Bank, Federal Home Loan Banks and certain exchanges of which Citigroup is a member.
(5) Includes $24 million and $27 million of investments in funds for which the fair values are estimated using the net asset value of the Company’s ownership interest in the funds at September 30, 2023 and December 31, 2022, respectively.
(6) Not included in the balances above is approximately $2 billion of accrued interest receivable at September 30, 2023 and December 31, 2022, which is included in Other assets on the Consolidated Balance Sheet. The Company does not recognize an allowance for credit losses on accrued interest receivable for AFS and HTM debt securities, consistent with its non-accrual policy, which results in timely write-off of accrued interest. The Company did not reverse through interest income any accrued interest receivables for the quarters ended September 30, 2023 and 2022.
The following table presents interest and dividend income on investments:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||
|---|---|---|---|---|---|---|---|---|
| In millions of dollars | 2023 | 2022 | 2023 | 2022 | ||||
| Taxable interest | $ | 4,547 | $ | 2,714 | $ | 12,831 | $ | 7,001 |
| Interest exempt from U.S. federal income tax | 83 | 220 | 252 | 263 | ||||
| Dividend income | 89 | 59 | 231 | 149 | ||||
| Total interest and dividend income on investments | $ | 4,719 | $ | 2,993 | $ | 13,314 | $ | 7,413 |
The following table presents realized gains and losses on the sales of investments, which exclude impairment losses:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||
|---|---|---|---|---|---|---|---|---|
| In millions of dollars | 2023 | 2022 | 2023 | 2022 | ||||
| Gross realized investment gains | $ | 83 | $ | 102 | $ | 262 | $ | 282 |
| Gross realized investment losses | (53) | (50) | (111) | (208) | ||||
| Net realized gains on sales of investments | $ | 30 | $ | 52 | $ | 151 | $ | 74 |
Debt Securities Available-for-Sale
The amortized cost and fair value of AFS debt securities were as follows:
| September 30, 2023 | December 31, 2022 | |||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| In millions of dollars | Amortized<br>cost | Gross<br>unrealized<br>gains | Gross<br>unrealized<br>losses | Allowance for credit losses | Fair<br>value | Amortized<br>cost | Gross<br>unrealized<br>gains | Gross<br>unrealized<br>losses | Allowance for credit losses | Fair<br>value | ||||||||||
| Debt securities AFS | ||||||||||||||||||||
| Mortgage-backed securities(1) | ||||||||||||||||||||
| U.S. government-sponsored agency guaranteed(2)(3) | $ | 20,750 | $ | 23 | $ | 958 | $ | — | $ | 19,815 | $ | 12,009 | $ | 8 | $ | 755 | $ | — | $ | 11,262 |
| Residential | 310 | — | 3 | — | 307 | 488 | — | 3 | — | 485 | ||||||||||
| Commercial | 1 | — | — | — | 1 | 2 | — | — | — | 2 | ||||||||||
| Total mortgage-backed securities | $ | 21,061 | $ | 23 | $ | 961 | $ | — | $ | 20,123 | $ | 12,499 | $ | 8 | $ | 758 | $ | — | $ | 11,749 |
| U.S. Treasury and federal agency securities | ||||||||||||||||||||
| U.S. Treasury | $ | 83,029 | $ | 21 | $ | 1,782 | $ | — | $ | 81,268 | $ | 94,732 | $ | 50 | $ | 2,492 | $ | — | $ | 92,290 |
| Agency obligations | — | — | — | — | — | — | — | — | — | — | ||||||||||
| Total U.S. Treasury and federal agency securities | $ | 83,029 | $ | 21 | $ | 1,782 | $ | — | $ | 81,268 | $ | 94,732 | $ | 50 | $ | 2,492 | $ | — | $ | 92,290 |
| State and municipal | $ | 2,204 | $ | 6 | $ | 179 | $ | — | $ | 2,031 | $ | 2,363 | $ | 19 | $ | 159 | $ | — | $ | 2,223 |
| Foreign government | 127,245 | 234 | 2,083 | — | 125,396 | 135,648 | 569 | 2,940 | — | 133,277 | ||||||||||
| Corporate | 5,653 | 13 | 268 | 5 | 5,393 | 5,146 | 19 | 246 | 3 | 4,916 | ||||||||||
| Asset-backed securities(1) | 681 | 3 | 2 | — | 682 | 1,022 | 12 | 4 | — | 1,030 | ||||||||||
| Other debt securities | 6,890 | 2 | 2 | — | 6,890 | 4,198 | 1 | 5 | — | 4,194 | ||||||||||
| Total debt securities AFS | $ | 246,763 | $ | 302 | $ | 5,277 | $ | 5 | $ | 241,783 | $ | 255,608 | $ | 678 | $ | 6,604 | $ | 3 | $ | 249,679 |
(1)The Company invests in mortgage- and asset-backed securities, which are typically issued by VIEs through securitization transactions. 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. See Note 20 for mortgage- and asset-backed securitizations in which the Company has other involvement.
(2)In January 2023, Citi adopted ASU 2022-01. Upon adoption, Citi transferred $3.3 billion of mortgage-backed securities from HTM classification to AFS classification as allowed under the ASU. At the time of transfer, the securities were in an unrealized gain position of $0.1 billion, which was recorded in AOCI upon transfer. See Note 1 to the Consolidated Financial Statements in Citi’s 2022 Form 10-K.
(3)Amortized cost includes unallocated portfolio layer cumulative basis adjustments of $(0.5) billion as of September 30, 2023. Gross unrealized gains and gross unrealized losses on mortgage-backed securities excluding the effect of unallocated portfolio layer cumulative basis adjustments were $2 million and $1.5 billion, respectively, as of September 30, 2023.
The following table presents the fair value of AFS debt securities that have been in an unrealized loss position:
| Less than 12 months | 12 months or longer | Total | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| In millions of dollars | Fair<br>value | Gross<br>unrealized<br>losses | Fair<br>value | Gross<br>unrealized<br>losses | Fair<br>value | Gross<br>unrealized<br>losses | ||||||
| September 30, 2023 | ||||||||||||
| Debt securities AFS | ||||||||||||
| Mortgage-backed securities | ||||||||||||
| U.S. government-sponsored agency guaranteed | $ | 7,751 | $ | 154 | $ | 8,945 | $ | 804 | $ | 16,696 | $ | 958 |
| Residential | 298 | 3 | 4 | — | 302 | 3 | ||||||
| Commercial | — | — | — | — | — | — | ||||||
| Total mortgage-backed securities | $ | 8,049 | $ | 157 | $ | 8,949 | $ | 804 | $ | 16,998 | $ | 961 |
| U.S. Treasury and federal agency securities | ||||||||||||
| U.S. Treasury | $ | 23,045 | $ | 705 | $ | 48,721 | $ | 1,077 | $ | 71,766 | $ | 1,782 |
| Total U.S. Treasury and federal agency securities | $ | 23,045 | $ | 705 | $ | 48,721 | $ | 1,077 | $ | 71,766 | $ | 1,782 |
| State and municipal | $ | 751 | $ | 39 | $ | 864 | $ | 140 | $ | 1,615 | $ | 179 |
| Foreign government | 73,044 | 1,425 | 19,780 | 658 | 92,824 | 2,083 | ||||||
| Corporate | 2,858 | 213 | 1,583 | 55 | 4,441 | 268 | ||||||
| Asset-backed securities | 214 | 2 | — | — | 214 | 2 | ||||||
| Other debt securities | 1,359 | 2 | — | — | 1,359 | 2 | ||||||
| Total debt securities AFS | $ | 109,320 | $ | 2,543 | $ | 79,897 | $ | 2,734 | $ | 189,217 | $ | 5,277 |
| December 31, 2022 | ||||||||||||
| Debt securities AFS | ||||||||||||
| Mortgage-backed securities | ||||||||||||
| U.S. government-sponsored agency guaranteed | $ | 7,908 | $ | 412 | $ | 3,290 | $ | 343 | $ | 11,198 | $ | 755 |
| Residential | 158 | 3 | 1 | — | 159 | 3 | ||||||
| Commercial | 1 | — | 1 | — | 2 | — | ||||||
| Total mortgage-backed securities | $ | 8,067 | $ | 415 | $ | 3,292 | $ | 343 | $ | 11,359 | $ | 758 |
| U.S. Treasury and federal agency securities | ||||||||||||
| U.S. Treasury | $ | 40,701 | $ | 1,001 | $ | 34,692 | $ | 1,491 | $ | 75,393 | $ | 2,492 |
| Agency obligations | — | — | — | — | — | — | ||||||
| Total U.S. Treasury and federal agency securities | $ | 40,701 | $ | 1,001 | $ | 34,692 | $ | 1,491 | $ | 75,393 | $ | 2,492 |
| State and municipal | $ | 896 | $ | 31 | $ | 707 | $ | 128 | $ | 1,603 | $ | 159 |
| Foreign government | 82,900 | 2,332 | 14,220 | 608 | 97,120 | 2,940 | ||||||
| Corporate | 3,082 | 209 | 784 | 37 | 3,866 | 246 | ||||||
| Asset-backed securities | 708 | 4 | — | — | 708 | 4 | ||||||
| Other debt securities | 2,213 | 5 | — | — | 2,213 | 5 | ||||||
| Total debt securities AFS | $ | 138,567 | $ | 3,997 | $ | 53,695 | $ | 2,607 | $ | 192,262 | $ | 6,604 |
The following table presents the amortized cost and fair value of AFS debt securities by contractual maturity dates:
| September 30, 2023 | December 31, 2022 | |||||||
|---|---|---|---|---|---|---|---|---|
| In millions of dollars | Amortized<br>cost | Fair<br>value | Amortized<br>cost | Fair<br>value | ||||
| Mortgage-backed securities(1) | ||||||||
| Due within 1 year | $ | 10 | $ | 10 | $ | 42 | $ | 44 |
| After 1 but within 5 years | 364 | 354 | 523 | 513 | ||||
| After 5 but within 10 years | 570 | 527 | 468 | 440 | ||||
| After 10 years | 20,659 | 19,232 | 11,466 | 10,752 | ||||
| Total(2) | $ | 21,603 | $ | 20,123 | $ | 12,499 | $ | 11,749 |
| U.S. Treasury and federal agency securities | ||||||||
| Due within 1 year | $ | 35,939 | $ | 35,588 | $ | 25,935 | $ | 25,829 |
| After 1 but within 5 years | 46,561 | 45,219 | 68,455 | 66,166 | ||||
| After 5 but within 10 years | 529 | 461 | 342 | 295 | ||||
| After 10 years | — | — | — | — | ||||
| Total | $ | 83,029 | $ | 81,268 | $ | 94,732 | $ | 92,290 |
| State and municipal | ||||||||
| Due within 1 year | $ | 13 | $ | 12 | $ | 19 | $ | 18 |
| After 1 but within 5 years | 106 | 103 | 94 | 92 | ||||
| After 5 but within 10 years | 326 | 310 | 305 | 302 | ||||
| After 10 years | 1,759 | 1,606 | 1,945 | 1,811 | ||||
| Total | $ | 2,204 | $ | 2,031 | $ | 2,363 | $ | 2,223 |
| Foreign government | ||||||||
| Due within 1 year | $ | 60,383 | $ | 59,996 | $ | 64,795 | $ | 64,479 |
| After 1 but within 5 years | 60,881 | 59,656 | 67,935 | 66,150 | ||||
| After 5 but within 10 years | 5,490 | 5,326 | 2,491 | 2,250 | ||||
| After 10 years | 491 | 418 | 427 | 398 | ||||
| Total | $ | 127,245 | $ | 125,396 | $ | 135,648 | $ | 133,277 |
| All other(3) | ||||||||
| Due within 1 year | $ | 6,169 | $ | 6,161 | $ | 4,452 | $ | 4,441 |
| After 1 but within 5 years | 6,172 | 5,962 | 5,162 | 4,988 | ||||
| After 5 but within 10 years | 818 | 813 | 695 | 693 | ||||
| After 10 years | 65 | 29 | 57 | 18 | ||||
| Total | $ | 13,224 | $ | 12,965 | $ | 10,366 | $ | 10,140 |
| Total debt securities AFS(2) | $ | 247,305 | $ | 241,783 | $ | 255,608 | $ | 249,679 |
(1)Includes mortgage-backed securities of U.S. government-sponsored agencies. The Company invests in mortgage- and asset-backed securities, which are typically issued by VIEs through securitization transactions. See Note 20 for more information about mortgage- and asset-backed securitizations in which the Company has other involvement.
(2)Amortized cost excludes unallocated portfolio layer cumulative basis adjustments of $(0.5) billion as of September 30, 2023.
(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 | Amortized<br><br>cost, net(1) | Gross<br>unrealized<br>gains | Gross<br>unrealized<br>losses | Fair<br>value | ||||
|---|---|---|---|---|---|---|---|---|
| September 30, 2023 | ||||||||
| Debt securities HTM | ||||||||
| Mortgage-backed securities(2) | ||||||||
| U.S. government-sponsored agency guaranteed(3) | $ | 81,442 | $ | — | $ | 13,354 | $ | 68,088 |
| Non-U.S. residential | 330 | — | — | 330 | ||||
| Commercial | 1,133 | — | 169 | 964 | ||||
| Total mortgage-backed securities | $ | 82,905 | $ | — | $ | 13,523 | $ | 69,382 |
| U.S. Treasury securities | $ | 134,934 | $ | — | $ | 13,413 | $ | 121,521 |
| State and municipal | 9,103 | 9 | 1,188 | 7,924 | ||||
| Foreign government | 2,314 | — | 89 | 2,225 | ||||
| Asset-backed securities(2) | 30,200 | 1 | 251 | 29,950 | ||||
| Total debt securities HTM, net | $ | 259,456 | $ | 10 | $ | 28,464 | $ | 231,002 |
| December 31, 2022 | ||||||||
| Debt securities HTM | ||||||||
| Mortgage-backed securities(2) | ||||||||
| U.S. government-sponsored agency guaranteed | $ | 90,063 | $ | 58 | $ | 10,033 | $ | 80,088 |
| Non-U.S. residential | 445 | — | — | 445 | ||||
| Commercial | 1,114 | 5 | 1 | 1,118 | ||||
| Total mortgage-backed securities | $ | 91,622 | $ | 63 | $ | 10,034 | $ | 81,651 |
| U.S. Treasury securities | $ | 134,961 | $ | — | $ | 13,722 | $ | 121,239 |
| State and municipal | 9,237 | 34 | 764 | 8,507 | ||||
| Foreign government | 2,075 | — | 93 | 1,982 | ||||
| Asset-backed securities(2) | 30,968 | 4 | 703 | 30,269 | ||||
| Total debt securities HTM, net | $ | 268,863 | $ | 101 | $ | 25,316 | $ | 243,648 |
(1)Amortized cost is reported net of ACL of $95 million and $120 million at September 30, 2023 and December 31, 2022, respectively.
(2)The Company invests in mortgage- and asset-backed securities. These securitizations are generally considered VIEs. The Company’s maximum exposure to loss from these VIEs is equal to the carrying amount of the securities, which is reflected in the table above. See Note 20 for mortgage- and asset-backed securitizations in which the Company has other involvement.
(3)In January 2023, Citi adopted ASU 2022-01. Upon adoption, Citi transferred $3.3 billion of mortgage-backed securities from HTM classification to AFS classification as allowed under the ASU. At the time of transfer, the securities were in an unrealized gain position of $0.1 billion, which was recorded in AOCI upon transfer. See Note 1 to the Consolidated Financial Statements in Citi’s 2022 Form 10-K.
The following table presents the carrying value and fair value of HTM debt securities by contractual maturity dates:
| September 30, 2023 | December 31, 2022 | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| In millions of dollars | Amortized cost(1) | Fair value | Amortized cost(1) | Fair value | |||||
| Mortgage-backed securities | |||||||||
| Due within 1 year | $ | 20 | $ | 20 | $ | 27 | $ | 27 | |
| After 1 but within 5 years | 660 | 622 | 520 | 505 | |||||
| After 5 but within 10 years | 1,229 | 1,094 | 1,496 | 1,374 | |||||
| After 10 years | 80,996 | 67,646 | 89,579 | 79,745 | |||||
| Total | $ | 82,905 | $ | 69,382 | $ | 91,622 | $ | 81,651 | |
| U.S. Treasury securities | |||||||||
| Due within 1 year | $ | 3,403 | $ | 3,360 | $ | 3,148 | $ | 3,017 | |
| After 1 but within 5 years | 130,534 | 117,304 | 86,617 | 79,104 | |||||
| After 5 but within 10 years | 997 | 857 | 45,196 | 39,118 | |||||
| After 10 years | — | — | — | — | |||||
| Total | $ | 134,934 | $ | 121,521 | $ | 134,961 | $ | 121,239 | |
| State and municipal | |||||||||
| Due within 1 year | $ | 30 | $ | 30 | $ | 22 | $ | 21 | |
| After 1 but within 5 years | 116 | 113 | 102 | 100 | |||||
| After 5 but within 10 years | 1,289 | 1,187 | 1,002 | 967 | |||||
| After 10 years | 7,668 | 6,594 | 8,111 | 7,419 | |||||
| Total | $ | 9,103 | $ | 7,924 | $ | 9,237 | $ | 8,507 | |
| Foreign government | |||||||||
| Due within 1 year | $ | 1,131 | $ | 1,090 | $ | 143 | $ | 139 | |
| After 1 but within 5 years | 1,183 | 1,135 | 1,932 | 1,843 | |||||
| After 5 but within 10 years | — | — | — | — | |||||
| After 10 years | — | — | — | — | |||||
| Total | $ | 2,314 | $ | 2,225 | $ | 2,075 | $ | 1,982 | |
| All other(2) | |||||||||
| Due within 1 year | $ | — | $ | — | $ | — | $ | — | |
| After 1 but within 5 years | 1 | 1 | — | — | |||||
| After 5 but within 10 years | 12,016 | 11,970 | 11,751 | 11,583 | |||||
| After 10 years | 18,183 | 17,979 | 19,217 | 18,686 | |||||
| Total | $ | 30,200 | $ | 29,950 | $ | 30,968 | $ | 30,269 | |
| Total debt securities HTM | $ | 259,456 | $ | 231,002 | $ | 268,863 | $ | 243,648 |
(1)Amortized cost is reported net of ACL of $95 million and $120 million at September 30, 2023 and December 31, 2022, respectively.
(2)Includes corporate and asset-backed securities.
HTM Debt Securities Delinquency and Non-Accrual Details
Citi did not have any HTM debt securities that were delinquent or on non-accrual status at September 30, 2023 or December 31, 2022.
There were no purchased credit-deteriorated HTM debt securities held by the Company as of September 30, 2023 or December 31, 2022.
Evaluating Investments for Impairment—AFS Debt Securities
Overview
The Company conducts periodic reviews of all AFS debt securities with unrealized losses to evaluate whether the impairment resulted from expected credit losses or from other factors and to evaluate the Company’s intent to sell such securities.
For more information on evaluating investments for impairment, see Note 13 to the Consolidated Financial Statements in Citi’s 2022 Form 10-K.
Recognition and Measurement of Impairment
The following table presents total impairment on AFS investments recognized in earnings:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||
|---|---|---|---|---|---|---|---|---|
| In millions of dollars | 2023 | 2022 | 2023 | 2022 | ||||
| Impairment losses related to debt securities that the Company does not intend to sell <br>nor will likely be required to sell: | ||||||||
| Total impairment losses recognized during the period | $ | — | $ | — | $ | — | $ | — |
| Less: Portion of impairment loss recognized in AOCI (before taxes) | — | — | — | — | ||||
| Net impairment losses recognized in earnings for debt securities that the Company <br>does not intend to sell nor will likely be required to sell | $ | — | $ | — | $ | — | $ | — |
| Impairment losses recognized in earnings for debt securities that the Company <br>intends to sell, would more-likely-than-not be required to sell or will be subject <br>to an issuer call deemed probable of exercise | 43 | 74 | 137 | 254 | ||||
| Total impairment losses recognized in earnings | $ | 43 | $ | 74 | $ | 137 | $ | 254 |
Allowance for Credit Losses on AFS Debt Securities
The allowance for credit losses on AFS debt securities held that the Company does not intend to sell nor will likely be required to sell was $5 million and $3 million as of September 30, 2023 and December 31, 2022, respectively.
Non-Marketable Equity Securities Not Carried at
Fair Value
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.
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. For details on impairment indicators that are considered, see Note 13 to the Consolidated Financial Statements in Citi’s 2022 Form 10-K.
When the qualitative assessment indicates that the equity security is impaired, its fair value is determined. If the fair value of the investment is less than its carrying value, the investment is written down to fair value through earnings.
Below is the carrying value of non-marketable equity securities measured using the measurement alternative at September 30, 2023 and December 31, 2022:
| In millions of dollars | September 30, 2023 | December 31, 2022 | ||
|---|---|---|---|---|
| Measurement alternative: | ||||
| Carrying value | $ | 1,621 | $ | 1,676 |
Below are amounts recognized in earnings and life-to-date amounts for non-marketable equity securities measured using the measurement alternative:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||
|---|---|---|---|---|---|---|---|---|
| In millions of dollars | 2023 | 2022 | 2023 | 2022 | ||||
| Measurement alternative(1): | ||||||||
| Impairment losses | $ | 27 | $ | 17 | $ | 90 | $ | 23 |
| Downward changes for observable prices | 4 | — | 24 | — | ||||
| Upward changes for observable prices | 17 | 7 | 49 | 141 |
(1) See Note 22 for additional information on these nonrecurring fair value measurements.
| Life-to-date amounts on securities still held | ||
|---|---|---|
| In millions of dollars | September 30, 2023 | |
| Measurement alternative: | ||
| Impairment losses | $ | 299 |
| Downward changes for observable prices | 28 | |
| Upward changes for observable prices | 913 |
A similar impairment analysis is performed for non-marketable equity securities carried at cost. For the three months ended September 30, 2023 and 2022, there was no impairment loss recognized in earnings for non-marketable equity securities carried at cost.
13. LOANS
Citigroup loans are reported in two categories: corporate and consumer. These categories are classified primarily according to the operating segment, reporting unit and component that manage the loans in addition to the nature of the obligor, with corporate loans generally made for corporate institutional and public sector clients around the world and consumer loans to retail and small business customers. For additional information regarding Citi’s corporate and consumer loans, including related accounting policies, see Note 1 above and Notes 1 and 14 to the Consolidated Financial Statements in Citi’s 2022 Form 10-K.
Corporate Loans
Corporate loans represent loans and leases managed by ICG and the Mexico SBMM component of Legacy Franchises. The following table presents information by corporate loan type:
| In millions of dollars | September 30,<br>2023 | December 31,<br>2022 | ||
|---|---|---|---|---|
| In North America offices(1) | ||||
| Commercial and industrial | $ | 58,130 | $ | 56,176 |
| Financial institutions | 36,783 | 43,399 | ||
| Mortgage and real estate(2) | 17,445 | 17,829 | ||
| Installment and other | 23,207 | 23,767 | ||
| Lease financing | 225 | 308 | ||
| Total | $ | 135,790 | $ | 141,479 |
| In offices outside North America(1) | ||||
| Commercial and industrial | $ | 95,528 | $ | 93,967 |
| Financial institutions | 23,759 | 21,931 | ||
| Mortgage and real estate(2) | 6,481 | 4,179 | ||
| Installment and other | 24,407 | 23,347 | ||
| Lease financing | 46 | 46 | ||
| Governments and official institutions | 2,794 | 4,205 | ||
| Total | $ | 153,015 | $ | 147,675 |
| Corporate loans, net of unearned income, excluding portfolio layer cumulative basis adjustments(4)(5)(6) | $ | 288,805 | $ | 289,154 |
| Unallocated portfolio layer cumulative basis adjustments(3) | $ | (171) | $ | — |
| Corporate loans, net of unearned income(4)(5)(6) | $ | 288,634 | $ | 289,154 |
(1)North America includes the U.S., Canada and Puerto Rico. Mexico is included in offices outside North America. The classification between offices in North America and outside North America is based on the domicile of the booking unit. The difference between the domicile of the booking unit and the domicile of the managing unit is not material.
(2)Loans secured primarily by real estate.
(3)Represents fair value hedge basis adjustments related to portfolio layer method hedges of mortgage and real estate loans, which are not allocated to individual loans in the portfolio. See Note 21.
(4)Corporate loans are net of unearned income of ($806) million and ($797) million at September 30, 2023 and December 31, 2022, respectively. Unearned income on corporate loans primarily represents interest received in advance, but not yet earned, on loans originated on a discounted basis.
(5)Not included in the balances above is approximately $2 billion of accrued interest receivable at September 30, 2023 and December 31, 2022, which is included in Other assets on the Consolidated Balance Sheet.
(6)Accrued interest receivable considered to be uncollectible is reversed through interest income. Amounts reversed were not material for the three and nine months ended September 30, 2023 and 2022.
The Company sold and/or reclassified to held-for-sale $1.3 billion and $4.2 billion of corporate loans during the three and nine months ended September 30, 2023, respectively, and $2.2 billion and $3.7 billion of corporate loans during the three and nine months ended September 30, 2022, respectively. The Company did not have significant purchases of corporate loans classified as held-for-investment for the three and nine months ended September 30, 2023 or 2022.
Corporate Loan Delinquencies and Non-Accrual Details at September 30, 2023
| In millions of dollars | 30–89 days<br><br>past due<br><br>and accruing(1) | ≥ 90 days<br><br>past due and<br><br>accruing(1) | Total past due<br>and accruing | Total<br><br>non-accrual(2) | Total<br><br>current(3) | Total<br><br>loans(4) | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Commercial and industrial | $ | 402 | $ | 183 | $ | 585 | $ | 903 | $ | 148,907 | $ | 150,395 |
| Financial institutions | 106 | 5 | 111 | 87 | 59,948 | 60,146 | ||||||
| Mortgage and real estate | 8 | 100 | 108 | 821 | 22,932 | 23,861 | ||||||
| Lease financing | — | — | — | — | 271 | 271 | ||||||
| Other | 70 | 20 | 90 | 164 | 46,689 | 46,943 | ||||||
| Loans at fair value | 7,189 | |||||||||||
| Total(5) | $ | 586 | $ | 308 | $ | 894 | $ | 1,975 | $ | 278,747 | $ | 288,805 |
Corporate Loan Delinquencies and Non-Accrual Details at December 31, 2022
| In millions of dollars | 30–89 days<br><br>past due<br><br>and accruing(1) | ≥ 90 days<br><br>past due and<br><br>accruing(1) | Total past due<br>and accruing | Total<br><br>non-accrual(2) | Total<br><br>current(3) | Total<br><br>loans(4) | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Commercial and industrial | $ | 763 | $ | 594 | $ | 1,357 | $ | 860 | $ | 145,586 | $ | 147,803 |
| Financial institutions | 233 | 102 | 335 | 152 | 64,420 | 64,907 | ||||||
| Mortgage and real estate | 30 | 12 | 42 | 33 | 21,874 | 21,949 | ||||||
| Lease financing | — | 1 | 1 | 10 | 343 | 354 | ||||||
| Other | 145 | 18 | 163 | 67 | 48,788 | 49,018 | ||||||
| Loans at fair value | 5,123 | |||||||||||
| Total | $ | 1,171 | $ | 727 | $ | 1,898 | $ | 1,122 | $ | 281,011 | $ | 289,154 |
(1)Corporate loans that are 90 days past due are generally classified as non-accrual. Corporate loans are considered past due when principal or interest is contractually due but unpaid.
(2)Non-accrual loans generally include those loans that are 90 days or more past due or those loans for which Citi believes, based on actual experience and a forward-looking assessment of the collectibility of the loan in full, that the payment of interest and/or principal is doubtful.
(3)Loans less than 30 days past due are presented as current.
(4)The Total loans column includes loans at fair value, which are not included in the various delinquency columns and, therefore, the tables’ total rows will not cross-foot.
(5)Excludes $(171) million of unallocated portfolio layer cumulative basis adjustments at September 30, 2023.
Corporate Loans Credit Quality Indicators
| Recorded investment in loans(1) | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Term loans by year of origination | Revolving line<br><br>of credit arrangements(2) | September 30, 2023 | ||||||||||||||
| In millions of dollars | 2023 | 2022 | 2021 | 2020 | 2019 | Prior | ||||||||||
| Investment grade(3) | ||||||||||||||||
| Commercial and industrial(4) | $ | 42,312 | $ | 7,844 | $ | 4,809 | $ | 2,441 | $ | 2,751 | $ | 7,538 | $ | 36,301 | $ | 103,996 |
| Financial institutions(4) | 9,518 | 4,050 | 3,048 | 520 | 603 | 1,978 | 33,069 | 52,786 | ||||||||
| Mortgage and real estate | 2,075 | 4,881 | 3,874 | 3,026 | 1,725 | 1,903 | 141 | 17,625 | ||||||||
| Other(6) | 2,227 | 5,739 | 1,404 | 1,009 | 938 | 4,697 | 27,682 | 43,696 | ||||||||
| Total investment grade | $ | 56,132 | $ | 22,514 | $ | 13,135 | $ | 6,996 | $ | 6,017 | $ | 16,116 | $ | 97,193 | $ | 218,103 |
| Non-investment grade(3) | ||||||||||||||||
| Accrual | ||||||||||||||||
| Commercial and industrial(4) | $ | 16,057 | $ | 5,183 | $ | 2,328 | $ | 1,650 | $ | 920 | $ | 2,967 | $ | 16,391 | $ | 45,496 |
| Financial institutions(4) | 3,172 | 1,115 | 842 | 16 | 175 | 205 | 1,748 | 7,273 | ||||||||
| Mortgage and real estate | 658 | 776 | 946 | 677 | 653 | 1,103 | 602 | 5,415 | ||||||||
| Other(6) | 513 | 786 | 376 | 202 | 215 | 132 | 1,130 | 3,354 | ||||||||
| Non-accrual | ||||||||||||||||
| Commercial and industrial(4) | 80 | 71 | 74 | — | 45 | 178 | 455 | 903 | ||||||||
| Financial institutions | 7 | 3 | 28 | — | — | — | 49 | 87 | ||||||||
| Mortgage and real estate | 3 | 329 | 12 | 28 | 137 | 260 | 52 | 821 | ||||||||
| Other(5) | 12 | — | 41 | — | 62 | 2 | 47 | 164 | ||||||||
| Total non-investment grade | $ | 20,502 | $ | 8,263 | $ | 4,647 | $ | 2,573 | $ | 2,207 | $ | 4,847 | $ | 20,474 | $ | 63,513 |
| Loans at fair value(6) | $ | 7,189 | ||||||||||||||
| Corporate loans, net of unearned income(7) | $ | 76,634 | $ | 30,777 | $ | 17,782 | $ | 9,569 | $ | 8,224 | $ | 20,963 | $ | 117,667 | $ | 288,805 |
| Recorded investment in loans(1) | ||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ||
| Term loans by year of origination | Revolving line<br><br>of credit arrangements(2) | December 31, 2022 | ||||||||||||||
| In millions of dollars | 2022 | 2021 | 2020 | 2019 | 2018 | Prior | ||||||||||
| Investment grade(3) | ||||||||||||||||
| Commercial and industrial(4) | $ | 40,639 | $ | 6,124 | $ | 3,620 | $ | 3,458 | $ | 2,617 | $ | 7,048 | $ | 38,358 | $ | 101,864 |
| Financial institutions(4) | 11,850 | 3,877 | 835 | 922 | 333 | 1,327 | 37,462 | 56,606 | ||||||||
| Mortgage and real estate | 4,436 | 3,236 | 4,010 | 2,619 | 1,127 | 1,706 | 152 | 17,286 | ||||||||
| Other(6) | 7,649 | 2,687 | 1,439 | 643 | 2,119 | 3,832 | 26,805 | 45,174 | ||||||||
| Total investment grade | $ | 64,574 | $ | 15,924 | $ | 9,904 | $ | 7,642 | $ | 6,196 | $ | 13,913 | $ | 102,777 | $ | 220,930 |
| Non-investment grade(3) | ||||||||||||||||
| Accrual | ||||||||||||||||
| Commercial and industrial(4) | $ | 17,278 | $ | 3,139 | $ | 1,973 | $ | 1,331 | $ | 965 | $ | 3,546 | $ | 16,848 | $ | 45,080 |
| Financial institutions(4) | 4,708 | 630 | 197 | 254 | 47 | 240 | 2,073 | 8,149 | ||||||||
| Mortgage and real estate | 582 | 835 | 429 | 729 | 783 | 801 | 472 | 4,631 | ||||||||
| Other(6) | 1,244 | 559 | 391 | 413 | 1 | 219 | 1,292 | 4,119 | ||||||||
| Non-accrual | ||||||||||||||||
| Commercial and industrial | 1 | 12 | 99 | 115 | 49 | 105 | 479 | 860 | ||||||||
| Financial institutions(4) | 41 | 34 | — | — | — | — | 77 | 152 | ||||||||
| Mortgage and real estate | 10 | 4 | — | — | — | 19 | — | 33 | ||||||||
| Other(5) | 6 | — | 26 | 8 | 10 | 11 | 16 | 77 | ||||||||
| Total non-investment grade | $ | 23,870 | $ | 5,213 | $ | 3,115 | $ | 2,850 | $ | 1,855 | $ | 4,941 | $ | 21,257 | $ | 63,101 |
| Loans at fair value(6) | $ | 5,123 | ||||||||||||||
| Corporate loans, net of unearned income | $ | 88,444 | $ | 21,137 | $ | 13,019 | $ | 10,492 | $ | 8,051 | $ | 18,854 | $ | 124,034 | $ | 289,154 |
(1)Recorded investment in a loan includes net deferred loan fees and costs, unamortized premium or discount, less any direct write-downs.
(2)There were no significant revolving line of credit arrangements that converted to term loans during the period.
(3)Held-for-investment loans are accounted for on an amortized cost basis.
(4)Includes certain short-term loans with less than one year in tenor.
(5)Other includes installment and other, lease financing and loans to government and official institutions.
(6)Loans at fair value include loans to commercial and industrial, financial institutions, mortgage and real estate and other.
(7)Excludes $(171) million of unallocated portfolio layer cumulative basis adjustments at September 30, 2023.
Corporate Gross Credit Losses
The table below details gross credit losses recognized during the nine months ended September 30, 2023, by year of loan origination:
| For the Nine Months Ended September 30, 2023 | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| In millions of dollars | 2023 | 2022 | 2021 | 2020 | 2019 | Prior | Revolving line of credit arrangement | Total | ||||||||
| Commercial and industrial | $ | 9 | $ | 19 | $ | 1 | $ | 1 | $ | — | $ | 2 | $ | 73 | $ | 105 |
| Financial institutions | — | — | — | — | — | — | 38 | 38 | ||||||||
| Mortgage and real estate | — | — | — | 1 | — | 2 | 1 | 4 | ||||||||
| Other(1) | — | — | — | — | — | — | 50 | 50 | ||||||||
| Total | $ | 9 | $ | 19 | $ | 1 | $ | 2 | $ | — | $ | 4 | $ | 162 | $ | 197 |
(1) Other includes installment and other, lease financing and loans to government and official institutions.
Non-Accrual Corporate Loans
| September 30, 2023 | December 31, 2022 | |||||||
|---|---|---|---|---|---|---|---|---|
| In millions of dollars | Recorded<br><br>investment(1)(2) | Related specific<br>allowance | Recorded<br><br>investment(1)(2) | Related specific<br>allowance | ||||
| Non-accrual corporate loans with specific allowances | ||||||||
| Commercial and industrial | $ | 718 | $ | 205 | $ | 583 | $ | 268 |
| Financial institutions | 81 | 50 | 149 | 51 | ||||
| Mortgage and real estate | 628 | 114 | 33 | 4 | ||||
| Other | 10 | 1 | — | — | ||||
| Total non-accrual corporate loans with specific allowances | $ | 1,437 | $ | 370 | $ | 765 | $ | 323 |
| Non-accrual corporate loans without specific allowances | ||||||||
| Commercial and industrial | $ | 185 | N/A | $ | 277 | N/A | ||
| Financial institutions | 6 | N/A | 3 | N/A | ||||
| Mortgage and real estate | 193 | N/A | — | N/A | ||||
| Lease financing | — | N/A | 10 | N/A | ||||
| Other | 154 | N/A | 67 | N/A | ||||
| Total non-accrual corporate loans without specific allowances | $ | 538 | N/A | $ | 357 | N/A |
(1)Recorded investment in a loan includes net deferred loan fees and costs, unamortized premium or discount, less any direct write-downs.
(2)Interest income recognized for the three and nine months ended September 30, 2023 was $6 million and $31 million, respectively, and for the three and nine months ended September 30, 2022 was $10 million and $33 million, respectively.
N/A Not applicable
Corporate Loan Modifications to Borrowers Experiencing Financial Difficulty
Citi seeks to modify certain corporate loans to borrowers experiencing financial difficulty to reduce Citi’s exposure to loss, often providing the borrower with an opportunity to work through financial difficulties. Each modification is unique to the borrower’s individual circumstances. The following table details corporate loan modifications granted during the three and nine months ended September 30, 2023 to borrowers experiencing financial difficulty by type of modification granted and the financial effect of those modifications. Citi defines a corporate loan modification to a borrower experiencing financial difficulty as a modification of a loan classified as substandard or worse at the time of modification.
| For the Three and Nine Months Ended September 30, 2023 | |||||||
|---|---|---|---|---|---|---|---|
| In millions of dollars, except for weighted average term extension | Total modifications balance at September 30,<br><br>2023(1)(2)(3) | Term <br>extension | Combination:<br><br>Term extension and payment delay(4) | Weighted average term extension<br>(months) | |||
| Three Months Ended September 30, 2023 | |||||||
| Commercial and industrial | $ | 25 | $ | 25 | $ | — | 22 |
| Financial institutions | — | — | — | — | |||
| Mortgage and real estate | 35 | 35 | — | 55 | |||
| Other(5) | — | — | — | — | |||
| Total | $ | 60 | $ | 60 | $ | — | |
| Nine Months Ended September 30, 2023 | |||||||
| Commercial and industrial | $ | 93 | $ | 70 | $ | 23 | 28 |
| Financial institutions | — | — | — | — | |||
| Mortgage and real estate | 85 | 84 | 1 | 37 | |||
| Other(5) | — | — | — | — | |||
| Total | $ | 178 | $ | 154 | $ | 24 |
(1)The above table reflects activity for loans outstanding as of the end of the reporting period. The balances are not significant as a percentage of the total carrying values of loans by class of receivable as of September 30, 2023.
(2)Commitments to lend to borrowers experiencing financial difficulty that were granted modifications totaled $1 billion as of September 30, 2023.
(3)The allowance for corporate loans, including modified loans, is based on the borrower’s overall financial performance. Charge-offs for amounts deemed uncollectible may be recorded at the time of the modification or may have already been recorded in prior periods such that no charge-off is required at the time of modification.
(4)Payment delays either for principal or interest payments had an immaterial financial impact.
(5)Other includes installment and other, lease financing and loans to government and official institutions.
The following table presents the Company’s corporate troubled debt restructurings (TDRs), under previous GAAP, prior to the Company’s adoption of ASU No. 2022-02 on January 1, 2023:
| For the Three and Nine Months Ended September 30, 2022 | ||||||||
|---|---|---|---|---|---|---|---|---|
| In millions of dollars | Carrying value of TDRs modified during the period | TDRs<br><br>involving changes<br><br>in the amount<br><br>and/or timing of<br><br>principal payments(1) | TDRs<br><br>involving changes<br><br>in the amount<br><br>and/or timing of<br><br>interest payments(2) | TDRs<br>involving changes<br>in the amount<br>and/or timing of<br>both principal and<br>interest payments | ||||
| Three Months Ended September 30, 2022 | ||||||||
| Commercial and industrial | $ | 11 | $ | — | $ | — | $ | 11 |
| Mortgage and real estate | 1 | 1 | — | — | ||||
| Other(3) | 7 | — | — | 7 | ||||
| Total | $ | 19 | $ | 1 | $ | — | $ | 18 |
| Nine Months Ended September 30, 2022 | ||||||||
| Commercial and industrial | $ | 26 | $ | — | $ | — | $ | 26 |
| Mortgage and real estate | 1 | 1 | — | — | ||||
| Other(3) | 30 | — | — | 30 | ||||
| Total | $ | 57 | $ | 1 | $ | — | $ | 56 |
(1) TDRs involving changes in the amount or timing of principal payments may involve principal forgiveness or deferral of periodic and/or final principal payments. Because forgiveness of principal is rare for corporate loans, modifications typically have little to no impact on the loans’ projected cash flows and thus little to no
impact on the allowance established for the loans. Charge-offs for amounts deemed uncollectible may be recorded at the time of the restructuring or may have already been recorded in prior periods such that no charge-off is required at the time of the modification.
(2) TDRs involving changes in the amount or timing of interest payments may involve a below-market interest rate.
(3) Other includes installment and other, lease financing and loans to government and official institutions.
Performance of Modified Corporate Loans
The following table presents the delinquencies of modified corporate loans to borrowers experiencing financial difficulty. It includes loans that were modified during the nine months ended September 30, 2023:
| As of September 30, 2023(1) | ||||||||
|---|---|---|---|---|---|---|---|---|
| In millions of dollars | Total | Current | 30–89 days<br><br>past due | 90+ days <br>past due | ||||
| Commercial and industrial | $ | 93 | $ | 93 | $ | — | $ | — |
| Financial institutions | — | — | — | — | ||||
| Mortgage and real estate | 85 | 85 | — | — | ||||
| Other(2) | — | — | — | — | ||||
| Total | $ | 178 | $ | 178 | $ | — | $ | — |
(1)Corporate loans are generally not modified as a result of their delinquency status; rather, they are modified because of events that have impacted the overall financial performance of the borrower. Corporate loans, if past due, are re-aged to current status upon modification.
(2)Other includes installment and other, lease financing and loans to government and official institutions.
Defaults of Modified Corporate Loans
No modified corporate loans to borrowers experiencing financial difficulty defaulted during the three and nine months ended September 30, 2023. Default is defined as 60 days past due, except for classifiably managed commercial banking loans, where default is defined as 90 days past due. For a modified corporate loan that is not collateral dependent, expected default rates are considered in the loan’s individually assessed ACL.
The following table presents the Company’s three and nine months ended September 30, 2022 corporate TDRs, under previous GAAP, prior to the Company’s adoption of ASU No. 2022-02 on January 1, 2023, that defaulted for which the payment default occurred within one year of a permanent modification. Default is defined as 60 days past due:
| TDR loans that re-defaulted within one year of modification during the | ||||||
|---|---|---|---|---|---|---|
| In millions of dollars | TDR balances at September 30, 2022 | Three Months Ended <br>September 30, 2022 | Nine Months Ended <br>September 30, 2022 | |||
| Commercial and industrial | $ | 114 | $ | — | $ | — |
| Mortgage and real estate | 14 | — | — | |||
| Other(1) | 22 | — | — | |||
| Total(2) | $ | 150 | $ | — | $ | — |
(1) Other includes installment and other, lease financing and loans to government and official institutions.
(2) The above table reflects activity for loans outstanding that were considered TDRs as of the end of the reporting period.
Consumer Loans
Consumer loans represent loans and leases managed primarily by PBWM and Legacy Franchises (except Mexico SBMM). The tables below present details about these loans, including the following loan categories:
•Residential first mortgages and Home equity loans primarily represent secured mortgage lending to customers of Retail banking and Global Wealth.
•Credit cards primarily represent unsecured credit card lending to customers of Branded cards and Retail services.
•Personal, small business and other loans are primarily composed of classifiably managed loans to customers of Global Wealth (mostly within the Private bank) who are typically high credit quality borrowers that historically experienced minimal delinquencies and credit losses. Loans to these borrowers are generally well collateralized in the form of liquid securities and other forms of collateral.
The following tables provide Citi’s consumer loans by type:
Consumer Loans, Delinquencies and Non-Accrual Status at September 30, 2023
| In millions of dollars | Total<br><br>current(1)(2) | 30–89<br><br>days past<br><br>due(3)(4) | ≥ 90 days<br><br>past<br><br>due(3)(4) | Past due<br><br>government<br><br>guaranteed(5) | Total loans | Non-accrual loans for which there is no ACLL | Non-accrual loans for which there is an ACLL | Total<br>non-accrual | 90 days <br>past due<br>and accruing | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| In North America offices(6) | ||||||||||||||||||
| Residential first mortgages(7) | $ | 105,453 | $ | 389 | $ | 294 | $ | 233 | $ | 106,369 | $ | 102 | $ | 384 | $ | 486 | $ | 120 |
| Home equity loans(8)(9) | 3,675 | 32 | 89 | — | 3,796 | 47 | 132 | 179 | — | |||||||||
| Credit cards | 151,560 | 2,093 | 2,045 | — | 155,698 | — | — | — | 2,045 | |||||||||
| Personal, small business and other(10) | 36,447 | 92 | 49 | 2 | 36,590 | 3 | 56 | 59 | 5 | |||||||||
| Total | $ | 297,135 | $ | 2,606 | $ | 2,477 | $ | 235 | $ | 302,453 | $ | 152 | $ | 572 | $ | 724 | $ | 2,170 |
| In offices outside North America(6) | ||||||||||||||||||
| Residential mortgages(7) | $ | 26,268 | $ | 49 | $ | 72 | $ | — | $ | 26,389 | $ | — | $ | 258 | $ | 258 | $ | 20 |
| Credit cards | 13,179 | 192 | 202 | — | 13,573 | — | 187 | 187 | 59 | |||||||||
| Personal, small business and other(10) | 35,154 | 104 | 41 | — | 35,299 | — | 133 | 133 | — | |||||||||
| Total | $ | 74,601 | $ | 345 | $ | 315 | $ | — | $ | 75,261 | $ | — | $ | 578 | $ | 578 | $ | 79 |
| Total Citigroup(11)(12) | $ | 371,736 | $ | 2,951 | $ | 2,792 | $ | 235 | $ | 377,714 | $ | 152 | $ | 1,150 | $ | 1,302 | $ | 2,249 |
Consumer Loans, Delinquencies and Non-Accrual Status at December 31, 2022
| In millions of dollars | Total<br><br>current(1)(2) | 30–89<br><br>days past<br><br>due(3)(4) | ≥ 90 days<br><br>past<br><br>due(3)(4) | Past due<br><br>government<br><br>guaranteed(5) | Total<br>loans | Non-accrual loans for which there is no ACLL | Non-accrual loans for which there is an ACLL | Total<br>non-accrual | 90 days <br>past due<br>and accruing | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| In North America offices(6) | ||||||||||||||||||
| Residential first mortgages(7) | $ | 95,023 | $ | 421 | $ | 316 | $ | 279 | $ | 96,039 | $ | 86 | $ | 434 | $ | 520 | $ | 163 |
| Home equity loans(8)(9) | 4,407 | 38 | 135 | — | 4,580 | 51 | 151 | 202 | — | |||||||||
| Credit cards | 147,717 | 1,511 | 1,415 | — | 150,643 | — | — | — | 1,415 | |||||||||
| Personal, small business and other(10) | 37,635 | 88 | 22 | 7 | 37,752 | 3 | 23 | 26 | 11 | |||||||||
| Total | $ | 284,782 | $ | 2,058 | $ | 1,888 | $ | 286 | $ | 289,014 | $ | 140 | $ | 608 | $ | 748 | $ | 1,589 |
| In offices outside North America(6) | ||||||||||||||||||
| Residential mortgages(7) | $ | 27,946 | $ | 62 | $ | 106 | $ | — | $ | 28,114 | $ | — | $ | 305 | $ | 305 | $ | 13 |
| Credit cards | 12,659 | 147 | 149 | — | 12,955 | — | 127 | 127 | 56 | |||||||||
| Personal, small business and other(10) | 37,869 | 105 | 10 | — | 37,984 | — | 137 | 137 | — | |||||||||
| Total | $ | 78,474 | $ | 314 | $ | 265 | $ | — | $ | 79,053 | $ | — | $ | 569 | $ | 569 | $ | 69 |
| Total Citigroup(11)(12) | $ | 363,256 | $ | 2,372 | $ | 2,153 | $ | 286 | $ | 368,067 | $ | 140 | $ | 1,177 | $ | 1,317 | $ | 1,658 |
(1)Loans less than 30 days past due are presented as current.
(2)Includes $222 million and $237 million at September 30, 2023 and December 31, 2022, respectively, of residential first mortgages recorded at fair value.
(3)Excludes loans guaranteed by U.S. government-sponsored agencies. Excludes delinquencies on $29.8 billion and $17.0 billion of classifiably managed Private bank loans in North America and outside North America, respectively, at September 30, 2023. Excludes delinquencies on $31.5 billion and $17.8 billion of classifiably managed Private bank loans in North America and outside North America, respectively, at December 31, 2022.
(4)Loans modified under Citi’s COVID-19 consumer relief programs continue to be reported in the same delinquency bucket they were in at the time of modification. Most modified loans in North America would not be reported as 30–89 or 90+ days past due for the duration of the programs (which have various durations, and certain of which may be renewed).
(5)Consists of loans that are guaranteed by U.S. government-sponsored agencies that are 30–89 days past due of $0.1 billion and $0.1 billion and 90 days or more past due of $0.1 billion and $0.2 billion at September 30, 2023 and December 31, 2022, respectively.
(6)North America includes the U.S., Canada and Puerto Rico. Mexico is included in offices outside North America.
(7)Includes approximately $0.2 billion and $0.0 billion of residential first mortgage loans in process of foreclosure in North America and outside North America, respectively, and $20.0 billion of residential mortgages outside North America related to the Global Wealth business at September 30, 2023. Includes approximately $0.1 billion and $0.0 billion of residential first mortgage loans in process of foreclosure in North America and outside North America, respectively, and $19.8 billion of residential mortgages outside North America related to the Global Wealth business at December 31, 2022.
(8)Includes approximately $0.1 billion and $0.1 billion at September 30, 2023 and December 31, 2022, respectively, of home equity loans in process of foreclosure.
(9)Fixed-rate home equity loans and loans extended under home equity lines of credit, which are typically in junior lien positions.
(10)As of September 30, 2023, Global Wealth business in North America includes $32.3 billion of loans, of which $29.8 billion are classifiably managed with 96% rated investment grade, and Global Wealth business outside North America includes $24.9 billion of loans, of which $17.0 billion are classifiably managed with 93% rated investment grade. As of December 31, 2022, Global Wealth business in North America includes $34.0 billion of loans, of which $31.5 billion are classifiably managed with 98% rated investment grade, and Global Wealth business outside North America includes $26.6 billion of loans, of which $17.8 billion are classifiably managed with 94% rated investment grade. Such loans are shown as “current” above.
(11)Consumer loans are net of unearned income of $789 million and $712 million at September 30, 2023 and December 31, 2022, respectively. Unearned income on consumer loans primarily represents unamortized origination fees and costs, premiums and discounts.
(12)Not included in the balances above are approximately $1 billion and $1 billion of accrued interest receivable at September 30, 2023 and December 31, 2022, respectively, which are included in Other assets on the Consolidated Balance Sheet, except for credit card loans (which include accrued interest and fees).
During the three and nine months ended September 30, 2023, the Company reversed accrued interest (primarily related to credit cards) of approximately $0.3 billion and $0.8 billion, respectively, and during the three and nine months ended September 30, 2022, the Company reversed accrued interest of approximately $0.2 billion and $0.5 billion, respectively. These reversals of accrued interest are reflected as a reduction to Interest revenue in the Consolidated Statement of Income.
Interest Income Recognized for Non-Accrual Consumer Loans
| In millions of dollars | Three Months Ended September 30, 2023 | Three Months Ended September 30, 2022 | Nine Months Ended September 30, 2023 | Nine Months Ended September 30, 2022 | ||||
|---|---|---|---|---|---|---|---|---|
| In North America offices(1) | ||||||||
| Residential first mortgages | $ | 2 | $ | 3 | $ | 8 | $ | 9 |
| Home equity loans | 2 | 1 | 5 | 3 | ||||
| Credit cards | — | — | — | — | ||||
| Personal, small business and other | 1 | 1 | 2 | 2 | ||||
| Total | $ | 5 | $ | 5 | $ | 15 | $ | 14 |
| In offices outside North America(1) | ||||||||
| Residential mortgages | $ | 2 | $ | 2 | $ | 7 | $ | 2 |
| Credit cards | — | — | — | — | ||||
| Personal, small business and other | — | — | — | — | ||||
| Total | $ | 2 | $ | 2 | $ | 7 | $ | 2 |
| Total Citigroup | $ | 7 | $ | 7 | $ | 22 | $ | 16 |
(1)North America includes the U.S., Canada and Puerto Rico. Mexico is included in offices outside North America.
During the three and nine months ended September 30, 2023, the Company sold and/or reclassified to held-for-sale $1 million and $1.8 billion (a mortgage portfolio, which was moved to HFS in 1Q23 and subsequently sold in 2Q23) of consumer loans, respectively. During the three and nine months ended September 30, 2022, the Company sold and/or reclassified to held-for-sale $0 million and $337 million of consumer loans, respectively. The increase was due to the reclassification of a portfolio to HFS in the first quarter of 2023. The Company did not have significant purchases of consumer loans classified as held-for-investment for the three and nine months ended September 30, 2023 or 2022. Loans held by a business for sale are not included in the above since they have been reclassified to Other assets. See Note 2 for additional information regarding Citigroup’s businesses held-for-sale.
Consumer Credit Scores (FICO)
The following tables provide details on the Fair Isaac Corporation (FICO) scores for Citi’s U.S. consumer loan portfolio based on end-of-period receivables by year of origination. FICO scores are updated monthly for substantially all of the portfolio or, otherwise, on a quarterly basis for the remaining portfolio. Loans that did not have FICO scores as of the prior period have been updated with FICO scores as they become available. With respect to Citi’s consumer loan portfolio outside of the U.S. as of September 30, 2023 and
December 31, 2022 ($76.8 billion and $80.5 billion, respectively), various country-specific or regional credit risk metrics and acquisition and behavior scoring models are leveraged as one of the factors to evaluate the credit quality of customers (for additional information on loans outside of the U.S., see “Consumer Loans and Ratios Outside of North America” below). As a result, details of relevant credit quality indicators for those loans are not comparable to the below FICO score distribution for the U.S. portfolio.
| FICO score distribution—U.S. portfolio(1) | September 30, 2023 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| In millions of dollars | Less than<br>680 | 680 <br>to 760 | Greater<br>than 760 | Classifiably managed(2) | FICO not available(3) | Total <br>loans | ||||||
| Residential first mortgages | ||||||||||||
| 2023 | $ | 300 | $ | 4,526 | $ | 9,067 | ||||||
| 2022 | 698 | 6,331 | 13,766 | |||||||||
| 2021 | 592 | 5,574 | 12,503 | |||||||||
| 2020 | 412 | 4,235 | 10,738 | |||||||||
| 2019 | 280 | 2,367 | 5,239 | |||||||||
| Prior | 2,073 | 6,980 | 13,472 | |||||||||
| Total residential first mortgages | $ | 4,355 | $ | 30,013 | $ | 64,785 | $ | — | $ | 7,216 | $ | 106,369 |
| Home equity loans (pre-reset) | $ | 418 | $ | 1,079 | $ | 1,745 | ||||||
| Home equity loans (post-reset) | 74 | 76 | 51 | |||||||||
| Home equity term loans | 87 | 131 | 102 | |||||||||
| 2023 | — | — | — | |||||||||
| 2022 | — | — | — | |||||||||
| 2021 | — | — | 1 | |||||||||
| 2020 | — | 2 | 2 | |||||||||
| 2019 | 1 | 1 | 1 | |||||||||
| Prior | 86 | 128 | 98 | |||||||||
| Total home equity loans | $ | 579 | $ | 1,286 | $ | 1,898 | $ | — | $ | 33 | $ | 3,796 |
| Credit cards | $ | 30,570 | $ | 60,462 | $ | 60,592 | ||||||
| Revolving loans converted to term loans(4) | 1,013 | 375 | 53 | |||||||||
| Total credit cards(5) | $ | 31,583 | $ | 60,837 | $ | 60,645 | $ | — | $ | 2,027 | $ | 155,092 |
| Personal, small business and other | ||||||||||||
| 2023 | $ | 84 | $ | 304 | $ | 633 | ||||||
| 2022 | 293 | 440 | 575 | |||||||||
| 2021 | 77 | 104 | 127 | |||||||||
| 2020 | 9 | 11 | 16 | |||||||||
| 2019 | 10 | 10 | 11 | |||||||||
| Prior | 131 | 177 | 130 | |||||||||
| Total personal, small business and other(6)(7) | $ | 604 | $ | 1,046 | $ | 1,492 | $ | 29,828 | $ | 2,721 | $ | 35,691 |
| Total | $ | 37,121 | $ | 93,182 | $ | 128,820 | $ | 29,828 | $ | 11,997 | $ | 300,948 |
| FICO score distribution—U.S. portfolio(1) | December 31, 2022 | |||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| In millions of dollars | Less than<br>680 | 680<br>to 760 | Greater<br>than 760 | Classifiably managed(2) | FICO not available(3) | Total<br>loans | ||||||
| Residential first mortgages | ||||||||||||
| 2022 | $ | 691 | $ | 7,530 | $ | 12,928 | ||||||
| 2021 | 639 | 5,933 | 12,672 | |||||||||
| 2020 | 431 | 4,621 | 10,936 | |||||||||
| 2019 | 321 | 2,505 | 5,445 | |||||||||
| 2018 | 302 | 1,072 | 1,899 | |||||||||
| Prior | 2,020 | 6,551 | 12,649 | |||||||||
| Total residential first mortgages | $ | 4,404 | $ | 28,212 | $ | 56,529 | $ | 6,894 | $ | 96,039 | ||
| Home equity line of credit (pre-reset) | $ | 552 | $ | 1,536 | $ | 1,876 | ||||||
| Home equity line of credit (post-reset) | 62 | 65 | 40 | |||||||||
| Home equity term loans | 106 | 151 | 117 | |||||||||
| 2022 | — | — | — | |||||||||
| 2021 | — | 1 | 1 | |||||||||
| 2020 | 1 | 2 | 2 | |||||||||
| 2019 | 1 | 2 | 2 | |||||||||
| 2018 | 1 | 2 | 1 | |||||||||
| Prior | 103 | 144 | 111 | |||||||||
| Total home equity loans | $ | 720 | $ | 1,752 | $ | 2,033 | $ | 75 | $ | 4,580 | ||
| Credit cards | $ | 27,901 | $ | 58,213 | $ | 60,896 | ||||||
| Revolving loans converted to term loans(4) | 766 | 354 | 54 | |||||||||
| Total credit cards(5) | $ | 28,667 | $ | 58,567 | $ | 60,950 | $ | 1,914 | $ | 150,098 | ||
| Personal, small business and other | ||||||||||||
| 2022 | $ | 247 | $ | 546 | $ | 800 | ||||||
| 2021 | 96 | 170 | 210 | |||||||||
| 2020 | 15 | 20 | 30 | |||||||||
| 2019 | 21 | 23 | 28 | |||||||||
| 2018 | 10 | 10 | 9 | |||||||||
| Prior | 126 | 190 | 144 | |||||||||
| Total personal, small business and other(6)(7) | $ | 515 | $ | 959 | $ | 1,221 | $ | 31,478 | $ | 2,639 | $ | 36,812 |
| Total | $ | 34,306 | $ | 89,490 | $ | 120,733 | $ | 31,478 | $ | 11,522 | $ | 287,529 |
(1) The FICO bands in the tables are consistent with general industry peer presentations.
(2) These personal, small business and other loans without a FICO score available include $29.8 billion and $31.5 billion of Private bank loans as of September 30, 2023 and December 31, 2022, respectively, which are classifiably managed within Global Wealth and are primarily evaluated for credit risk based on their internal risk ratings. As of September 30, 2023 and December 31, 2022, approximately 96% and 98% of these loans, respectively, were rated investment grade.
(3) FICO scores not available related to loans guaranteed by government-sponsored enterprises for which FICO scores are generally not utilized.
(4) Not included in the tables above are $68 million and $75 million of revolving credit card loans outside of the U.S. that were converted to term loans as of September 30, 2023 and December 31, 2022, respectively.
(5) Excludes $606 million and $545 million of balances related to Canada for September 30, 2023 and December 31, 2022, respectively.
(6) Excludes $899 million and $940 million of balances related to Canada for September 30, 2023 and December 31, 2022, respectively.
(7) Includes approximately $42 million and $67 million of personal revolving loans that were converted to term loans for September 30, 2023 and December 31, 2022, respectively.
Consumer Gross Credit Losses
The following table provides details on gross credit losses recognized during the nine months ended September 30, 2023, by year of loan origination:
| In millions of dollars | Nine Months Ended September 30, 2023 | |
|---|---|---|
| Residential first mortgages | ||
| 2023 | $ | — |
| 2022 | 2 | |
| 2021 | — | |
| 2020 | 1 | |
| 2019 | 5 | |
| Prior | 31 | |
| Total residential first mortgages | $ | 39 |
| Home equity line of credit (pre-reset) | $ | 2 |
| Home equity line of credit (post-reset) | — | |
| Home equity term loans | 2 | |
| Total home equity loans | $ | 4 |
| Credit cards | $ | 4,598 |
| Revolving loans converted to term loans | 132 | |
| Total credit cards | $ | 4,730 |
| Personal, small business and other | ||
| 2023 | $ | 110 |
| 2022 | 146 | |
| 2021 | 83 | |
| 2020 | 34 | |
| 2019 | 38 | |
| Prior | 132 | |
| Total personal, small business and other | $ | 543 |
| Total Citigroup | $ | 5,316 |
Loan-to-Value (LTV) Ratios—U.S. Consumer Mortgages
LTV ratios (loan balance divided by appraised value) are calculated at origination and updated by applying market price data.
The following tables provide details on the LTV ratios for Citi’s U.S. consumer mortgage portfolios by year of origination. LTV ratios are updated monthly using the most recent Core Logic Home Price Index data available for substantially all of the portfolio, applied at the Metropolitan Statistical Area level, if available, or the state level if not. The remainder of the portfolio is updated in a similar manner using the Federal Housing Finance Agency indices.
| LTV distribution—U.S. portfolio | September 30, 2023 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| In millions of dollars | Less than<br> or equal <br>to 80% | > 80% but less<br>than or equal to 100% | Greater<br>than<br>100% | LTV not available(1) | Total | |||||
| Residential first mortgages | ||||||||||
| 2023 | $ | 11,461 | $ | 2,668 | $ | 8 | ||||
| 2022 | 17,794 | 4,057 | 42 | |||||||
| 2021 | 19,047 | 663 | 33 | |||||||
| 2020 | 16,325 | 241 | 1 | |||||||
| 2019 | 8,306 | 182 | 26 | |||||||
| Prior | 24,138 | 197 | 75 | |||||||
| Total residential first mortgages | $ | 97,071 | $ | 8,008 | $ | 185 | $ | 1,105 | $ | 106,369 |
| Home equity loans (pre-reset) | $ | 2,846 | $ | 19 | $ | 7 | ||||
| Home equity loans (post-reset) | 486 | 6 | 12 | |||||||
| Total home equity loans | $ | 3,332 | $ | 25 | $ | 19 | $ | 420 | $ | 3,796 |
| Total | $ | 100,403 | $ | 8,033 | $ | 204 | $ | 1,525 | $ | 110,165 |
| LTV distribution—U.S. portfolio | December 31, 2022 | |||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| In millions of dollars | Less than<br> or equal <br>to 80% | > 80% but less<br>than or equal to 100% | Greater<br>than<br>100% | LTV not available(1) | Total | |||||
| Residential first mortgages | ||||||||||
| 2022 | $ | 15,644 | $ | 6,497 | $ | 40 | ||||
| 2021 | 19,104 | 1,227 | 33 | |||||||
| 2020 | 16,935 | 267 | 1 | |||||||
| 2019 | 8,789 | 140 | 23 | |||||||
| 2018 | 3,598 | 74 | 9 | |||||||
| Prior | 22,367 | 132 | 74 | |||||||
| Total residential first mortgages | $ | 86,437 | $ | 8,337 | $ | 180 | $ | 1,085 | $ | 96,039 |
| Home equity loans (pre-reset) | $ | 3,677 | $ | 36 | $ | 56 | ||||
| Home equity loans (post-reset) | 627 | 12 | 27 | |||||||
| Total home equity loans | $ | 4,304 | $ | 48 | $ | 83 | $ | 145 | $ | 4,580 |
| Total | $ | 90,741 | $ | 8,385 | $ | 263 | $ | 1,230 | $ | 100,619 |
(1)Residential first mortgages with no LTV information available includes government-guaranteed loans that do not require LTV information for credit risk assessment and fair value loans.
Loan-to-Value (LTV) Ratios—Outside of U.S. Consumer Mortgages
The following tables provide details on the LTV ratios for Citi’s consumer mortgage portfolio outside of the U.S. by year of origination:
| LTV distribution—outside of U.S. portfolio(1) | September 30, 2023 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| In millions of dollars | Less than<br> or equal <br>to 80% | > 80% but less<br>than or equal to 100% | Greater<br>than<br>100% | LTV not available | Total | |||||
| Residential mortgages | ||||||||||
| 2023 | $ | 2,304 | $ | 883 | $ | — | ||||
| 2022 | 3,303 | 957 | 187 | |||||||
| 2021 | 3,467 | 928 | 187 | |||||||
| 2020 | 2,494 | 446 | — | |||||||
| 2019 | 2,622 | 68 | — | |||||||
| Prior | 8,322 | 45 | 3 | |||||||
| Total | $ | 22,512 | $ | 3,327 | $ | 377 | $ | 173 | $ | 26,389 |
| LTV distribution—outside of U.S. portfolio(1) | December 31, 2022 | |||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| In millions of dollars | Less than<br> or equal <br>to 80% | > 80% but less<br>than or equal to 100% | Greater<br>than<br>100% | LTV not available | Total | |||||
| Residential mortgages | ||||||||||
| 2022 | $ | 3,106 | $ | 975 | $ | 294 | ||||
| 2021 | 4,144 | 964 | 273 | |||||||
| 2020 | 3,293 | 502 | 25 | |||||||
| 2019 | 3,048 | 92 | 1 | |||||||
| 2018 | 2,074 | 48 | — | |||||||
| Prior | 9,201 | 36 | 7 | |||||||
| Total | $ | 24,866 | $ | 2,617 | $ | 600 | $ | 31 | $ | 28,114 |
(1)Mortgage portfolios outside of the U.S. are primarily in Global Wealth. As of September 30, 2023 and December 31, 2022, mortgage portfolios outside of the U.S. had an average LTV of approximately 53% and 51%, respectively.
Consumer Loans and Ratios Outside of North America
| Delinquency-managed loans and ratios | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| In millions of dollars at September 30, 2023 | Total<br><br>loans outside of North America(1) | Classifiably managed loans(2) | Delinquency-managed loans | 30–89 <br>days past<br> due ratio | ≥ 90 days<br><br>past<br><br>due ratio | 3Q23 NCL ratio | 3Q22 NCL ratio | |||||||
| Residential mortgages(3) | $ | 26,389 | $ | — | $ | 26,389 | 0.19 | % | 0.27 | % | (0.01) | % | 0.18 | % |
| Credit cards | 13,573 | — | 13,573 | 1.41 | 1.49 | 4.35 | 3.22 | |||||||
| Personal, small business and other(4) | 35,299 | 16,954 | 18,345 | 0.57 | 0.22 | 0.99 | 0.74 | |||||||
| Total | $ | 75,261 | $ | 16,954 | $ | 58,307 | 0.59 | % | 0.54 | % | 1.24 | % | 0.91 | % |
| Delinquency-managed loans and ratios | ||||||||||||||
| In millions of dollars at December 31, 2022 | Total<br><br>loans outside<br><br>of North America(1) | Classifiably managed loans(2) | Delinquency-managed loans | 30–89 <br>days past<br> due ratio | ≥ 90 days<br><br>past<br><br>due ratio | |||||||||
| Residential mortgages(3) | $ | 28,114 | $ | — | $ | 28,114 | 0.22 | % | 0.38 | % | ||||
| Credit cards | 12,955 | — | 12,955 | 1.13 | 1.15 | |||||||||
| Personal, small business and other(4) | 37,984 | 17,762 | 20,222 | 0.52 | 0.05 | |||||||||
| Total | $ | 79,053 | $ | 17,762 | $ | 61,291 | 0.51 | % | 0.43 | % |
(1) Mexico is included in offices outside of North America.
(2) Classifiably managed loans are primarily evaluated for credit risk based on their internal risk classification. As of September 30, 2023 and December 31, 2022, approximately 93% and 94% of these loans, respectively, were rated investment grade.
(3) Includes $20.0 billion and $19.8 billion as of September 30, 2023 and December 31, 2022, respectively, of residential mortgages related to the Global Wealth business.
(4) Includes $24.9 billion and $26.6 billion as of September 30, 2023 and December 31, 2022, respectively, of loans related to the Global Wealth business.
Consumer Loan Modifications to Borrowers Experiencing Financial Difficulty
Citi seeks to modify consumer loans to borrowers experiencing financial difficulty to minimize losses, avoid foreclosure or repossession of collateral, and ultimately maximize payments received from the borrowers. Citi uses various metrics to identify consumer borrowers experiencing financial difficulty, with the primary indicator being delinquency at the time of modification. Citi’s significant consumer modification programs are described below.
Credit Cards
Citi seeks to assist credit card borrowers who are experiencing financial difficulty by offering long-term loan modification programs. These modifications generally involve reducing the interest rate on the credit card, placing the customer on a fixed payment plan not to exceed 60 months and canceling the customer’s available line of credit. Citi also grants modifications to credit card borrowers working with third-party renegotiation agencies that seek to restructure customers’ entire unsecured debt. In both circumstances, if the cardholder does not comply with the modified payment terms, the credit card loan continues to age and will ultimately be charged off in accordance with Citi’s standard charge-off policy. In certain situations, Citi may forgive a portion of an outstanding balance if the borrower pays a required amount.
Residential Mortgages
Citi utilizes a third-party subservicer for the servicing of its residential mortgage loans. Through this third-party subservicer, Citi seeks to assist residential mortgage borrowers who are experiencing financial difficulty primarily by offering interest rate reductions, principal and/or interest forbearance, term extensions or combinations thereof. Borrowers enrolled in forbearance programs typically have payments suspended until the end of the forbearance period. In the U.S., before permanently modifying the contractual payment terms of a mortgage loan, Citi enters into a trial modification with the borrower. Trial modifications generally represent a three-month period during which the borrower makes monthly payments under the anticipated modified payment terms. These loans continue to age and accrue interest in accordance with their original contractual terms. Upon successful completion of the trial period, and the borrower’s formal acceptance of the modified terms, Citi and the borrower enter into a permanent modification. Citi expects the majority of loans entering trial modifications to ultimately be enrolled in a permanent modification. During the three and nine months ended September 30, 2023, $12 million and $22 million, respectively, of mortgage loans were enrolled in trial programs. Mortgage loans of $4 million and $6 million had gone through Chapter 7 bankruptcy during the three and nine months ended September 30, 2023, respectively.
Types of Consumer Loan Modifications and Their Financial Effect
The following tables provide details on permanent consumer loan modifications granted during the three and nine months ended September 30, 2023 to borrowers experiencing financial difficulty by type of modification granted and the financial effect of those modifications:
| For the Three Months Ended September 30, 2023 | ||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| In millions of dollars, except weighted averages | Modifications as % of loans | Total modifications balance at September 30, 2023(1)(2)(3) | Interest rate reduction | Term extension | Payment delay | Combination: interest rate reduction and term extension | Combination: term extension and payment delay(4) | Weighted average interest rate reduction % | Weighted average term extension (months) | Weighted average delay in payments (months) | ||||||||
| In North America offices(5) | ||||||||||||||||||
| Residential first mortgages(6) | 0.05 | % | $ | 48 | $ | — | $ | 25 | $ | 19 | $ | 4 | $ | — | 1 | % | 220 | 6 |
| Home equity loans | 0.03 | 1 | — | — | 1 | — | — | 2 | 146 | 6 | ||||||||
| Credit cards | 0.22 | 339 | 339 | — | — | — | — | 22 | — | — | ||||||||
| Personal, small business and other | 0.01 | 4 | — | — | — | 4 | — | 6 | 15 | — | ||||||||
| Total | 0.13 | % | $ | 392 | $ | 339 | $ | 25 | $ | 20 | $ | 8 | $ | — | ||||
| In offices outside North America(5) | ||||||||||||||||||
| Residential mortgages | 0.99 | % | $ | 260 | $ | — | $ | — | $ | 7 | $ | — | $ | 253 | — | % | 1 | 1 |
| Credit cards | 0.10 | 13 | 13 | — | — | — | — | 18 | — | — | ||||||||
| Personal, small business and other | 0.02 | 7 | 1 | 2 | — | 4 | — | 8 | 21 | — | ||||||||
| Total | 0.37 | % | $ | 280 | $ | 14 | $ | 2 | $ | 7 | $ | 4 | $ | 253 | ||||
| For the Nine Months Ended September 30, 2023 | ||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | |
| In millions of dollars, except weighted averages | Modifications as % of loans | Total modifications balance at September 30, 2023(1)(2)(3) | Interest rate reduction | Term extension | Payment delay | Combination: interest rate reduction and term extension | Combination: term extension and payment delay(4) | Weighted average interest rate reduction % | Weighted average term extension (months) | Weighted average delay in payments (months) | ||||||||
| In North America offices(5) | ||||||||||||||||||
| Residential first mortgages(6) | 0.14 | % | $ | 145 | $ | 1 | $ | 53 | $ | 82 | $ | 9 | $ | — | 1 | % | 202 | 8 |
| Home equity loans | 0.55 | 21 | — | — | 8 | 13 | — | 2 | 122 | 8 | ||||||||
| Credit cards | 0.49 | 756 | 756 | — | — | — | — | 22 | — | — | ||||||||
| Personal, small business and other | 0.02 | 9 | 1 | — | — | 8 | — | 6 | 15 | — | ||||||||
| Total | 0.31 | % | $ | 931 | $ | 758 | $ | 53 | $ | 90 | $ | 30 | $ | — | ||||
| In offices outside North America(5) | ||||||||||||||||||
| Residential mortgages | 1.15 | % | $ | 303 | $ | — | $ | — | $ | 25 | $ | 1 | $ | 277 | 2 | % | 3 | 4 |
| Credit cards | 0.24 | 33 | 32 | — | — | 1 | — | 18 | 28 | — | ||||||||
| Personal, small business and other | 0.06 | 20 | 3 | 6 | — | 11 | — | 8 | 19 | — | ||||||||
| Total | 0.47 | % | $ | 356 | $ | 35 | $ | 6 | $ | 25 | $ | 13 | $ | 277 |
(1) The above tables reflect activity for loans outstanding as of the end of the reporting period. During the three and nine months ended September 30, 2023, Citi granted forgiveness of $17 million and $38 million, respectively, in credit card loans and $1 million and $2 million, respectively, in personal, small business and other loans that had no remaining outstanding balance at September 30, 2023.
(2) Commitments to lend to borrowers experiencing financial difficulty that were granted modifications included in the tables above were immaterial at September 30, 2023.
(3) For major consumer portfolios, the ACLL is based on macroeconomic-sensitive models that rely on historical performance and macroeconomic scenarios to forecast expected credit losses. Modifications of consumer loans impact expected credit losses by affecting the likelihood of default.
(4) Residential mortgages in offices outside North America were granted four months of payment deferrals during the six months ended December 31, 2022.
(5) North America includes the U.S., Canada and Puerto Rico. Mexico is included in offices outside North America.
(6) Excludes residential first mortgages discharged in Chapter 7 bankruptcy in the three and nine months ended September 30, 2023.
The following tables present the Company’s three and nine months ended September 30, 2022 consumer TDRs, under previous GAAP, prior to the Company’s adoption of ASU No. 2022-02 on January 1, 2023:
Consumer Troubled Debt Restructurings(1)
| For the Three Months Ended September 30, 2022 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| In millions of dollars, except number of loans modified | Number of<br>loans modified | Post-<br>modification<br>recorded<br>investment(2)(3) | Deferred<br>principal(4) | Contingent<br>principal<br>forgiveness(5) | Principal<br>forgiveness(6) | Average<br>interest rate<br>reduction | |||||
| In North America offices(7) | |||||||||||
| Residential first mortgages | 235 | $ | 58 | $ | — | $ | — | $ | — | — | % |
| Home equity loans | 117 | 14 | — | — | — | — | |||||
| Credit cards | 46,326 | 203 | — | — | — | 18 | |||||
| Personal, small business and other | 132 | 3 | — | — | — | 7 | |||||
| Total(8) | 46,810 | $ | 278 | $ | — | $ | — | $ | — | ||
| In offices outside North America(7) | |||||||||||
| Residential mortgages | 172 | $ | 6 | $ | — | $ | — | $ | — | — | % |
| Credit cards | 3,519 | 15 | — | — | — | 27 | |||||
| Personal, small business and other | 575 | 6 | — | — | 1 | 8 | |||||
| Total(8) | 4,266 | $ | 27 | $ | — | $ | — | $ | 1 | ||
| For the Nine Months Ended September 30, 2022 | |||||||||||
| In millions of dollars, except number of loans modified | Number of<br>loans modified | Post-<br>modification<br>recorded<br>investment(2)(9) | Deferred<br>principal(4) | Contingent<br>principal<br>forgiveness(5) | Principal<br>forgiveness(6) | Average<br>interest rate<br>reduction | |||||
| In North America offices(7) | |||||||||||
| Residential first mortgages | 860 | $ | 195 | $ | — | $ | — | $ | — | — | % |
| Home equity loans | 324 | 30 | — | — | — | — | |||||
| Credit cards | 123,886 | 533 | — | — | — | 18 | |||||
| Personal, small business and other | 383 | 5 | — | — | — | 5 | |||||
| Total(8) | 125,453 | $ | 763 | $ | — | $ | — | $ | — | ||
| In offices outside North America(7) | |||||||||||
| Residential first mortgages | 465 | $ | 16 | $ | — | $ | — | $ | — | — | % |
| Credit cards | 11,981 | 50 | — | — | 1 | 24 | |||||
| Personal, small business and other | 1,842 | 22 | — | — | 1 | 8 | |||||
| Total(8) | 14,288 | $ | 88 | $ | — | $ | — | $ | 2 |
(1)The above tables do not include loan modifications that meet the TDR relief criteria in the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) or the interagency guidance.
(2)Post-modification balances include past-due amounts that are capitalized at the modification date.
(3)Post-modification balances in North America include $1.8 million of residential first mortgages to borrowers who have gone through Chapter 7 bankruptcy in the three months ended September 30, 2022. These amounts include $1.8 million of residential first mortgages that were newly classified as TDRs in the three months ended September 30, 2022, based on previously received OCC guidance.
(4)Represents portion of contractual loan principal that is non-interest bearing, but still due from the borrower. Such deferred principal is charged off at the time of permanent modification to the extent that the related loan balance exceeds the underlying collateral value.
(5)Represents portion of contractual loan principal that is non-interest bearing and, depending upon borrower performance, eligible for forgiveness.
(6)Represents portion of contractual loan principal that was forgiven at the time of permanent modification.
(7)North America includes the U.S., Canada and Puerto Rico. Mexico is included in offices outside North America.
(8) The above tables reflect activity for restructured loans that were considered TDRs during the reporting period.
(9) Post-modification balances in North America include $3.7 million of residential first mortgages to borrowers who have gone through Chapter 7 bankruptcy in the nine months ended September 30, 2022. These amounts include $3.7 million of residential first mortgages that were newly classified as TDRs in the nine months ended September 30, 2022, based on previously received OCC guidance.
Performance of Modified Consumer Loans
The following table presents the delinquencies and gross credit losses of permanently modified consumer loans to borrowers experiencing financial difficulty. It includes loans that were modified during the nine months ended September 30, 2023:
| As of September 30, 2023 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| In millions of dollars | Total | Current | 30–89 days<br><br>past due | 90+ days <br>past due | Gross <br>credit losses | |||||
| In North America offices(1) | ||||||||||
| Residential first mortgages | $ | 145 | $ | 62 | $ | 19 | $ | 64 | $ | — |
| Home equity loans | 21 | 14 | 1 | 6 | — | |||||
| Credit cards | 756 | 522 | 143 | 91 | 118 | |||||
| Personal, small business and other | 9 | 8 | 1 | — | — | |||||
| Total(2)(3) | $ | 931 | $ | 606 | $ | 164 | $ | 161 | $ | 118 |
| In offices outside North America(1) | ||||||||||
| Residential mortgages | $ | 304 | $ | 301 | $ | 2 | $ | 1 | $ | — |
| Credit cards | 33 | 29 | 2 | 2 | 1 | |||||
| Personal, small business and other | 19 | 17 | 2 | — | — | |||||
| Total(2)(3) | $ | 356 | $ | 347 | $ | 6 | $ | 3 | $ | 1 |
(1) North America includes the U.S., Canada and Puerto Rico. Mexico is included in offices outside North America.
(2) Typically, upon modification a loan re-ages to current. However, FFIEC guidelines for re-aging certain loans require that at least three consecutive minimum monthly payments, or the equivalent amount, be received. In these cases, the loan will remain delinquent until the payment criteria for re-aging have been satisfied.
(3) Loans modified under Citi’s COVID-19 consumer relief programs continue to be reported in the same delinquency bucket they were in at the time of modification.
Defaults of Modified Consumer Loans
The following tables present default activity for permanently modified consumer loans to borrowers experiencing financial difficulty by type of modification granted, including loans that were modified and subsequently defaulted during the three and nine months ended September 30, 2023. Default is defined as 60 days past due:
| For the Three Months Ended September 30, 2023 | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| In millions of dollars | Total(1)(2) | Interest rate reduction | Term<br>extension | Payment<br>delay | Combination: interest rate reduction and term extension | Combination: term extension and payment delay | Combination: interest rate reduction, term extension and payment delay | |||||||
| In North America offices(3) | ||||||||||||||
| Residential first mortgages | $ | 6 | $ | — | $ | 5 | $ | 1 | $ | — | $ | — | $ | — |
| Home equity loans | — | — | — | — | — | — | — | |||||||
| Credit cards(4) | 61 | 61 | — | — | — | — | — | |||||||
| Personal, small business and other | — | — | — | — | — | — | — | |||||||
| Total | $ | 67 | $ | 61 | $ | 5 | $ | 1 | $ | — | $ | — | $ | — |
| In offices outside North America(3) | ||||||||||||||
| Residential mortgages | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — |
| Credit cards(4) | 2 | 2 | — | — | — | — | — | |||||||
| Personal, small business and other | — | — | — | — | — | — | — | |||||||
| Total | $ | 2 | $ | 2 | $ | — | $ | — | $ | — | $ | — | $ | — |
| For the Nine Months Ended September 30, 2023 | ||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| In millions of dollars | Total(1)(2) | Interest rate reduction | Term<br>extension | Payment<br>delay | Combination: interest rate reduction and term extension | Combination: term extension and payment delay | Combination: interest rate reduction, term extension and payment delay | |||||||
| In North America offices(3) | ||||||||||||||
| Residential first mortgages | $ | 7 | $ | 1 | $ | 5 | $ | 1 | $ | — | $ | — | $ | — |
| Home equity loans | — | — | — | — | — | — | — | |||||||
| Credit cards(4) | 93 | 93 | — | — | — | — | — | |||||||
| Personal, small business and other | — | — | — | — | — | — | — | |||||||
| Total | $ | 100 | $ | 94 | $ | 5 | $ | 1 | $ | — | $ | — | $ | — |
| In offices outside North America(3) | ||||||||||||||
| Residential mortgages | $ | 2 | $ | — | $ | — | $ | 2 | $ | — | $ | — | $ | — |
| Credit cards(4) | 3 | 3 | — | — | — | — | — | |||||||
| Personal, small business and other | 2 | — | — | — | 2 | — | — | |||||||
| Total | $ | 7 | $ | 3 | $ | — | $ | 2 | $ | 2 | $ | — | $ | — |
(1) The above table reflects activity for loans outstanding as of the end of the reporting period.
(2) Modified residential first mortgages that default are typically liquidated through foreclosure or a similar type of liquidation.
(3) North America includes the U.S., Canada and Puerto Rico. Mexico is included in offices outside North America.
(4) Modified credit card loans that default continue to be charged off in accordance with Citi’s consumer charge-off policy.
The following table presents the Company’s three and nine months ended September 30, 2022 consumer TDRs, under previous GAAP, prior to the Company’s adoption of ASU No. 2022-02 on January 1, 2023, that defaulted for which the payment default occurred within one year of a permanent modification. Default is defined as 60 days past due:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||
|---|---|---|---|---|
| In millions of dollars | 2022 | 2022 | ||
| In North America offices(1) | ||||
| Residential first mortgages | $ | 6 | $ | 23 |
| Home equity loans | 1 | 3 | ||
| Credit cards | 62 | 178 | ||
| Personal, small business and other | — | — | ||
| Total | $ | 69 | $ | 204 |
| In offices outside North America(1) | ||||
| Residential mortgages | $ | 2 | $ | 9 |
| Credit cards | 3 | 10 | ||
| Personal, small business and other | 1 | 3 | ||
| Total | $ | 6 | $ | 22 |
(1) North America includes the U.S., Canada and Puerto Rico. Mexico is included in offices outside North America.
14. ALLOWANCE FOR CREDIT LOSSES
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||
|---|---|---|---|---|---|---|---|---|
| In millions of dollars | 2023 | 2022 | 2023 | 2022 | ||||
| Allowance for credit losses on loans (ACLL) at beginning of period | $ | 17,496 | $ | 15,952 | $ | 16,974 | $ | 16,455 |
| Adjustments to opening balance(1) | ||||||||
| Financial instruments—TDRs and vintage disclosures(1) | $ | — | $ | — | $ | (352) | $ | — |
| Adjusted ACLL at beginning of period | $ | 17,496 | $ | 15,952 | $ | 16,622 | $ | 16,455 |
| Gross credit losses on loans | $ | (2,000) | $ | (1,237) | $ | (5,513) | $ | (3,689) |
| Gross recoveries on loans | 363 | 350 | 1,070 | 1,080 | ||||
| Net credit losses on loans (NCLs) | $ | (1,637) | $ | (887) | $ | (4,443) | $ | (2,609) |
| Replenishment of NCLs | $ | 1,637 | $ | 887 | $ | 4,443 | $ | 2,609 |
| Net reserve builds (releases) for loans | 100 | 519 | 787 | 259 | ||||
| Net specific reserve builds (releases) for loans | 79 | (78) | 84 | 104 | ||||
| Total provision for credit losses on loans (PCLL) | $ | 1,816 | $ | 1,328 | $ | 5,314 | $ | 2,972 |
| Other, net (see table below) | (46) | (84) | 136 | (509) | ||||
| ACLL at end of period | $ | 17,629 | $ | 16,309 | $ | 17,629 | $ | 16,309 |
| Allowance for credit losses on unfunded lending commitments (ACLUC) at beginning of period(2) | $ | 1,862 | $ | 2,193 | $ | 2,151 | $ | 1,871 |
| Provision (release) for credit losses on unfunded lending commitments | (54) | (71) | (344) | 244 | ||||
| Other, net | (2) | (33) | (1) | (26) | ||||
| ACLUC at end of period(2) | $ | 1,806 | $ | 2,089 | $ | 1,806 | $ | 2,089 |
| Total allowance for credit losses on loans, leases and unfunded lending commitments(3) | $ | 19,435 | $ | 18,398 | $ | 19,435 | $ | 18,398 |
| Other, net details | Three Months Ended September 30, | Nine Months Ended September 30, | ||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| In millions of dollars | 2023 | 2022 | 2023 | 2022 | ||||
| Reclasses of consumer ACLL to HFS(4) | $ | — | $ | — | $ | — | $ | (350) |
| FX translation and other | (46) | (84) | 136 | (159) | ||||
| Other, net | $ | (46) | $ | (84) | $ | 136 | $ | (509) |
(1) See Note 1 in Citi’s First Quarter of 2023 Form 10-Q for a description of the impact of adopting ASU 2022-02 on the ACL.
(2) Represents additional credit loss reserves for unfunded lending commitments and letters of credit recorded in Other liabilities on the Consolidated Balance Sheet.
(3) This line does not include $95 million and $698 million, and $115 million and $141 million, of ACL on HTM debt securities and Other assets at September 30, 2023 and 2022, respectively. See below for additional information.
(4) See Note 2.
Allowance for Credit Losses on Loans and End-of-Period Loans
| Three Months Ended | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30, 2023 | September 30, 2022 | |||||||||||
| In millions of dollars | Corporate | Consumer | Total | Corporate | Consumer | Total | ||||||
| ACLL at beginning of period | $ | 2,630 | $ | 14,866 | $ | 17,496 | $ | 2,969 | $ | 12,983 | $ | 15,952 |
| Charge-offs | (72) | (1,928) | (2,000) | (43) | (1,194) | (1,237) | ||||||
| Recoveries | 14 | 349 | 363 | 37 | 313 | 350 | ||||||
| Replenishment of NCLs | 58 | 1,579 | 1,637 | 6 | 881 | 887 | ||||||
| Net reserve builds (releases) | 25 | 75 | 100 | 145 | 374 | 519 | ||||||
| Net specific reserve builds (releases) | 77 | 2 | 79 | (104) | 26 | (78) | ||||||
| Other | (15) | (31) | (46) | (62) | (22) | (84) | ||||||
| Ending balance | $ | 2,717 | $ | 14,912 | $ | 17,629 | $ | 2,948 | $ | 13,361 | $ | 16,309 |
| Nine Months Ended | ||||||||||||
| September 30, 2023 | September 30, 2022 | |||||||||||
| In millions of dollars | Corporate | Consumer | Total | Corporate | Consumer | Total | ||||||
| ACLL at beginning of period | $ | 2,855 | $ | 14,119 | $ | 16,974 | $ | 2,415 | $ | 14,040 | $ | 16,455 |
| Adjustments to opening balance: | ||||||||||||
| Financial instruments—TDRs and vintage disclosures(1) | — | (352) | (352) | — | — | — | ||||||
| Adjusted ACLL at beginning of period | $ | 2,855 | $ | 13,767 | $ | 16,622 | $ | 2,415 | $ | 14,040 | $ | 16,455 |
| Charge-offs | $ | (197) | $ | (5,316) | $ | (5,513) | $ | (148) | $ | (3,541) | $ | (3,689) |
| Recoveries | 42 | 1,028 | 1,070 | 88 | 992 | 1,080 | ||||||
| Replenishment of NCLs | 155 | 4,288 | 4,443 | 60 | 2,549 | 2,609 | ||||||
| Net reserve builds (releases) | (184) | 971 | 787 | 394 | (135) | 259 | ||||||
| Net specific reserve builds (releases) | 49 | 35 | 84 | 169 | (65) | 104 | ||||||
| Other | (3) | 139 | 136 | (30) | (479) | (509) | ||||||
| Ending balance | $ | 2,717 | $ | 14,912 | $ | 17,629 | $ | 2,948 | $ | 13,361 | $ | 16,309 |
| September 30, 2023 | December 31, 2022 | |||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| In millions of dollars | Corporate | Consumer | Total | Corporate | Consumer | Total | ||||||
| ACLL | ||||||||||||
| Collectively evaluated(1) | $ | 2,347 | $ | 14,872 | $ | 17,219 | $ | 2,532 | $ | 13,521 | $ | 16,053 |
| Individually evaluated | 370 | 40 | 410 | 323 | 596 | 919 | ||||||
| Purchased credit deteriorated | — | — | — | — | 2 | 2 | ||||||
| Total ACLL | $ | 2,717 | $ | 14,912 | $ | 17,629 | $ | 2,855 | $ | 14,119 | $ | 16,974 |
| Loans, net of unearned income | ||||||||||||
| Collectively evaluated(1) | $ | 279,470 | $ | 377,320 | $ | 656,790 | $ | 282,909 | $ | 364,795 | $ | 647,704 |
| Individually evaluated | 1,975 | 58 | 2,033 | 1,122 | 2,921 | 4,043 | ||||||
| Purchased credit deteriorated | — | 114 | 114 | — | 114 | 114 | ||||||
| Held at fair value | 7,189 | 222 | 7,411 | 5,123 | 237 | 5,360 | ||||||
| Total loans, net of unearned income | $ | 288,634 | $ | 377,714 | $ | 666,348 | $ | 289,154 | $ | 368,067 | $ | 657,221 |
(1) See Note 1 in Citi’s First Quarter of 2023 Form 10-Q for a description of the effect of adopting ASU 2022-02 on the ACL and for Citi’s updated accounting policy for collectively evaluating the ACL for consumer loans formerly considered TDRs.
3Q23 Changes in the ACL
The total allowance for credit losses on loans, leases and unfunded lending commitments as of September 30, 2023 was $19,435 million, a slight increase from $19,125 million at December 31, 2022. The increase in the ACLL was primarily driven by growth in card balances in Branded cards and Retail services and an increase in transfer risk associated with exposures outside the U.S. driven by safety and soundness considerations under U.S. banking law, partially offset by a decrease in the ACLL of $352 million from the adoption of ASU 2022-02 for the recognition and measurement of TDRs (see Note 1) and improved key macroeconomic variable forecasts.
Consumer ACLL
Citi’s total consumer allowance for credit losses on loans (ACLL) as of September 30, 2023 was $14,912 million, an increase from $14,119 million at December 31, 2022. The increase was primarily driven by growth in U.S. cards balances, partially offset by a decrease to the ACLL of $352 million from the adoption of ASU 2022-02 for the recognition and measurement of TDRs.
Corporate ACLL
Citi’s total corporate ACLL as of September 30, 2023 was $2,717 million, a decrease from $2,855 million at December 31, 2022. The decrease was primarily driven by improved key macroeconomic variable forecasts.
ACLUC
As of September 30, 2023, Citi’s total ACLUC, included in Other liabilities, was $1,806 million, a decrease from $2,151 million at December 31, 2022. The decrease was primarily driven by improved key macroeconomic variable forecasts.
Allowance for Credit Losses on HTM Debt Securities
The allowance for credit losses on HTM debt securities, which the Company has the intent and ability to hold, was $95 million and $120 million as of September 30, 2023 and December 31, 2022, respectively.
Allowance for Credit Losses on Other Assets
| Three Months Ended September 30, 2023 | ||||||||
|---|---|---|---|---|---|---|---|---|
| In millions of dollars | Deposits with banks | Securities borrowed and purchased under agreements <br>to resell | All other assets(1) | Total | ||||
| Allowance for credit losses on other assets <br>at beginning of quarter | $ | 21 | $ | 26 | $ | 612 | $ | 659 |
| Gross credit losses | — | — | (19) | (19) | ||||
| Gross recoveries | — | — | 6 | 6 | ||||
| Net credit losses (NCLs) | $ | — | $ | — | $ | (13) | $ | (13) |
| Replenishment of NCLs | $ | — | $ | — | $ | 13 | $ | 13 |
| Net reserve builds (releases) | 6 | 30 | 7 | 43 | ||||
| Total provision for credit losses | $ | 6 | $ | 30 | $ | 20 | $ | 56 |
| Other, net | $ | — | $ | (3) | $ | (1) | $ | (4) |
| Allowance for credit losses on other assets <br>at end of quarter | $ | 27 | $ | 53 | $ | 618 | $ | 698 |
| Nine Months Ended September 30, 2023 | ||||||||
| In millions of dollars | Deposits with banks | Securities borrowed and purchased under agreements <br>to resell | All other assets(1) | Total | ||||
| Allowance for credit losses on other assets <br>at beginning of year | $ | 51 | $ | 36 | $ | 36 | $ | 123 |
| Gross credit losses | — | — | (54) | (54) | ||||
| Gross recoveries | — | — | 11 | 11 | ||||
| Net credit losses (NCLs) | $ | — | $ | — | $ | (43) | $ | (43) |
| Replenishment of NCLs | $ | — | $ | — | $ | 43 | $ | 43 |
| Net reserve builds (releases) | (23) | 27 | 583 | 587 | ||||
| Total provision for credit losses | $ | (23) | $ | 27 | $ | 626 | $ | 630 |
| Other, net | $ | (1) | $ | (10) | $ | (1) | $ | (12) |
| Allowance for credit losses on other assets <br>at end of quarter | $ | 27 | $ | 53 | $ | 618 | $ | 698 |
(1)Primarily an increase related to transfer risk associated with exposures outside of the U.S. driven by safety and soundness considerations under U.S. banking law.
| Three Months Ended September 30, 2022 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| In millions of dollars | Deposits with banks | Securities borrowed and purchased under agreements <br>to resell | Brokerage receivables | All other assets(1) | Total | |||||
| Allowance for credit losses on other assets <br>at beginning of quarter | $ | 17 | $ | 27 | $ | — | $ | 30 | $ | 74 |
| Gross credit losses | — | — | — | (4) | (4) | |||||
| Gross recoveries | — | — | — | — | — | |||||
| Net credit losses (NCLs) | $ | — | $ | — | $ | — | $ | (4) | $ | (4) |
| Replenishment of NCLs | $ | — | $ | — | $ | — | $ | 4 | $ | 4 |
| Net reserve builds (releases) | 23 | 45 | — | 1 | 69 | |||||
| Total provision for credit losses | $ | 23 | $ | 45 | $ | — | $ | 5 | $ | 73 |
| Other, net | $ | — | $ | (3) | $ | — | $ | 1 | $ | (2) |
| Allowance for credit losses on other assets <br>at end of quarter | $ | 40 | $ | 69 | $ | — | $ | 32 | $ | 141 |
| Nine Months Ended September 30, 2022 | ||||||||||
| In millions of dollars | Deposits with banks | Securities borrowed and purchased under agreements <br>to resell | Brokerage receivables | All other assets(1) | Total | |||||
| Allowance for credit losses on other assets <br>at beginning of year | $ | 21 | $ | 6 | $ | — | $ | 26 | $ | 53 |
| Gross credit losses | — | — | — | (19) | (19) | |||||
| Gross recoveries | — | — | — | 2 | 2 | |||||
| Net credit losses (NCLs) | $ | — | $ | — | $ | — | $ | (17) | $ | (17) |
| Replenishment of NCLs | $ | — | $ | — | $ | — | $ | 17 | $ | 17 |
| Net reserve builds (releases) | 19 | 35 | — | 5 | 59 | |||||
| Total provision for credit losses | $ | 19 | $ | 35 | $ | — | $ | 22 | $ | 76 |
| Other, net | $ | — | $ | 28 | $ | — | $ | 1 | $ | 29 |
| Allowance for credit losses on other assets <br>at end of quarter | $ | 40 | $ | 69 | $ | — | $ | 32 | $ | 141 |
(1) Primarily accounts receivable.
For ACL on AFS debt securities, see Note 12.
15. GOODWILL AND INTANGIBLE ASSETS
Goodwill
The changes in Goodwill were as follows:
| In millions of dollars | Institutional Clients Group | Personal Banking and Wealth Management | Legacy Franchises | Total | ||||
|---|---|---|---|---|---|---|---|---|
| Balance at December 31, 2022 | $ | 8,986 | $ | 9,741 | $ | 964 | $ | 19,691 |
| Foreign currency translation | 42 | 69 | 80 | 191 | ||||
| Balance at March 31, 2023 | $ | 9,028 | $ | 9,810 | $ | 1,044 | $ | 19,882 |
| Foreign currency translation | 13 | 48 | 55 | 116 | ||||
| Balance at June 30, 2023 | $ | 9,041 | $ | 9,858 | $ | 1,099 | $ | 19,998 |
| Foreign currency translation | (132) | (17) | (20) | (169) | ||||
| Balance at September 30, 2023 | $ | 8,909 | $ | 9,841 | $ | 1,079 | $ | 19,829 |
Citi tests for goodwill impairment annually as of October 1 (the annual test) and conducts interim assessments between the annual test if an event occurs or circumstances change that would more-likely-than-not reduce the fair value of a reporting unit below its carrying amount. No such events or circumstances were identified as part of the qualitative assessment performed as of September 30, 2023. For additional information regarding Citi’s goodwill impairment testing process, see Notes 1 and 16 to the Consolidated Financial Statements in Citi’s 2022 Form 10-K.
While the inherent risk related to uncertainty is embedded in the key assumptions used in the valuations of the reporting units, the economic and business environments continue to evolve as Citi’s management implements its strategic refresh. If management’s future estimates of key economic and market assumptions were to differ from its current assumptions, Citi could potentially experience material goodwill impairment charges in the future.
Intangible Assets
The components of intangible assets were as follows:
| September 30, 2023 | December 31, 2022 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| In millions of dollars | Gross<br>carrying<br>amount | Accumulated<br>amortization | Net<br>carrying<br>amount | Gross<br>carrying<br>amount | Accumulated<br>amortization | Net<br>carrying<br>amount | ||||||
| Purchased credit card relationships(1) | $ | 5,302 | $ | 4,328 | $ | 974 | $ | 5,513 | $ | 4,426 | $ | 1,087 |
| Credit card contract-related intangibles(2) | 4,178 | 1,652 | 2,526 | 3,903 | 1,518 | 2,385 | ||||||
| Other customer relationships | 346 | 270 | 76 | 373 | 283 | 90 | ||||||
| Present value of future profits | 36 | 35 | 1 | 32 | 31 | 1 | ||||||
| Indefinite-lived intangible assets | 234 | — | 234 | 192 | — | 192 | ||||||
| Other | — | — | — | 65 | 57 | 8 | ||||||
| Intangible assets (excluding MSRs) | $ | 10,096 | $ | 6,285 | $ | 3,811 | $ | 10,078 | $ | 6,315 | $ | 3,763 |
| Mortgage servicing rights (MSRs)(3) | 729 | — | 729 | 665 | — | 665 | ||||||
| Total intangible assets | $ | 10,825 | $ | 6,285 | $ | 4,540 | $ | 10,743 | $ | 6,315 | $ | 4,428 |
The changes in intangible assets were as follows:
| In millions of dollars | Net carrying amount at December 31, 2022 | Acquisitions/renewals/<br>divestitures | Amortization | Impairments | FX translation and other | Net carrying amount at September 30, 2023 | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Purchased credit card relationships(1) | $ | 1,087 | $ | — | $ | (113) | $ | — | $ | — | $ | 974 |
| Credit card contract-related intangibles(2) | 2,385 | 290 | (141) | — | (8) | 2,526 | ||||||
| Other customer relationships | 90 | 11 | (18) | — | (7) | 76 | ||||||
| Present value of future profits | 1 | — | — | — | — | 1 | ||||||
| Indefinite-lived intangible assets | 192 | 20 | — | — | 22 | 234 | ||||||
| Other | 8 | — | (8) | — | — | — | ||||||
| Intangible assets (excluding MSRs) | $ | 3,763 | $ | 321 | $ | (280) | $ | — | $ | 7 | $ | 3,811 |
| Mortgage servicing rights (MSRs)(3) | 665 | 729 | ||||||||||
| Total intangible assets | $ | 4,428 | $ | 4,540 |
(1)Reflects intangibles for the value of purchased cardholder relationships, which are discrete from contract-related intangibles.
(2)Reflects contract-related intangibles associated with the extension or renewal of existing credit card program agreements with card partners. For the credit card program agreement extended during 2023, the remaining term is over 10 years.
(3)See Note 20 for additional information on Citi’s MSRs, including the rollforward for the three months ended September 30, 2023.
16. DEPOSITS
Deposits consisted of the following:
| September 30, | December 31, | |||
|---|---|---|---|---|
| In millions of dollars | 2023(1) | 2022 | ||
| Non-interest-bearing deposits in U.S. offices | $ | 104,061 | $ | 122,655 |
| Interest-bearing deposits in U.S. offices (including $1,001 and $903 as of September 30, 2023 and December 31, 2022, respectively, at fair value) | 569,428 | 607,470 | ||
| Non-interest-bearing deposits in offices outside the U.S. | 84,663 | 95,182 | ||
| Interest-bearing deposits in offices outside the U.S. (including $1,721 and $972 as of September 30, 2023 and December 31, 2022, respectively, at fair value) | 515,354 | 540,647 | ||
| Total deposits | $ | 1,273,506 | $ | 1,365,954 |
(1) For information on time deposits that met or exceeded the insured limit at December 31, 2022, see Note 17 to the Consolidated Financial Statements in Citi’s 2022 Form 10-K.
For additional information on Citi’s deposits, see Citi’s 2022 Form 10-K.
17. DEBT
For additional information regarding Citi’s short-term borrowings and long-term debt, see Note 18 to the Consolidated Financial Statements in Citi’s 2022 Form 10-K.
Short-Term Borrowings
| In millions of dollars | September 30,<br>2023 | December 31,<br>2022 | ||
|---|---|---|---|---|
| Commercial paper | ||||
| Bank(1) | $ | 11,124 | $ | 11,185 |
| Broker-dealer and other(2) | 11,719 | 14,345 | ||
| Total commercial paper | $ | 22,843 | $ | 25,530 |
| Other borrowings(3) | 20,323 | 21,566 | ||
| Total | $ | 43,166 | $ | 47,096 |
(1)Represents Citibank entities as well as other bank entities.
(2)Represents broker-dealer and other non-bank subsidiaries that are consolidated into Citigroup Inc., the parent holding company.
(3)Includes borrowings from Federal Home Loan Banks and other market participants. At September 30, 2023 and December 31, 2022, collateralized short-term advances from Federal Home Loan Banks were $9.0 billion and $12.0 billion, respectively. At September 30, 2023, Other borrowings include $1.5 billion associated with the Series A preferred stock redemption announced on September 29, 2023, which was settled on October 30, 2023.
Long-Term Debt
| In millions of dollars | September 30,<br>2023 | December 31, 2022 | ||
|---|---|---|---|---|
| Citigroup Inc.(1) | $ | 160,571 | $ | 166,257 |
| Bank(2) | 24,560 | 21,113 | ||
| Broker-dealer and other(3) | 90,629 | 84,236 | ||
| Total | $ | 275,760 | $ | 271,606 |
(1)Represents the parent holding company.
(2)Represents Citibank entities as well as other bank entities. At September 30, 2023 and December 31, 2022, collateralized long-term advances from the Federal Home Loan Banks were $8.5 billion and $7.3 billion, respectively.
(3)Represents broker-dealer and other non-bank subsidiaries that are consolidated into Citigroup Inc., the parent holding company. Certain Citigroup consolidated hedging activities are also included in this line.
Long-term debt outstanding includes trust preferred securities with a balance sheet carrying value of $1.6 billion at September 30, 2023 and December 31, 2022.
The following table summarizes Citi’s outstanding trust preferred securities at September 30, 2023:
| Junior subordinated debentures owned by trust | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Trust | Issuance<br>date | Securities<br>issued | Liquidation<br><br>value(1) | Coupon<br><br>rate(2) | Common<br>shares<br>issued<br>to parent | Notional amount | Maturity | Redeemable<br>by issuer<br>beginning | |||
| In millions of dollars, except securities and share amounts | |||||||||||
| Citigroup Capital III | Dec. 1996 | 194,053 | $ | 194 | 7.625 | % | 6,003 | $ | 200 | Dec. 1, 2036 | Not redeemable |
| Citigroup Capital XIII | Oct. 2010 | 89,840,000 | 2,246 | 3 mo. SOFR +663.161 bps(3) | 1,000 | 2,246 | Oct. 30, 2040 | Oct. 30, 2015 | |||
| Total obligated | $ | 2,440 | $ | 2,446 |
Note: Distributions on the trust preferred securities and interest on the subordinated debentures are payable semiannually for Citigroup Capital III and quarterly for Citigroup Capital XIII.
(1)Represents the notional value received by outside investors from the trusts at the time of issuance. This differs from Citi’s balance sheet carrying value due primarily to unamortized discount and issuance costs.
(2)In each case, the coupon rate on the subordinated debentures is the same as that on the trust preferred securities.
(3)The spread incorporates the contractual LIBOR-based spread and a 26.161 bps tenor spread adjustment.
18. CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (AOCI)
Changes in each component of Citigroup’s Accumulated other comprehensive income (loss) were as follows:
| In millions of dollars | Net<br>unrealized<br>gains (losses)<br>on debt securities | Debt valuation adjustment (DVA)(1) | Cash flow hedges(2) | Benefit plans(3) | CTA, net of hedges(4) | Excluded component of fair value hedges | Long-duration insurance contracts(5) | Accumulated<br>other<br>comprehensive income (loss) | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Three Months Ended<br>September 30, 2023 | ||||||||||||||||
| Balance, June 30, 2023 | $ | (5,036) | $ | (102) | $ | (1,990) | $ | (5,995) | $ | (32,773) | $ | 5 | $ | 26 | $ | (45,865) |
| Other comprehensive income before reclassifications | (176) | 290 | 366 | 274 | (1,496) | (3) | 23 | (722) | ||||||||
| Increase (decrease) due to amounts reclassified from AOCI | 7 | 9 | 365 | 38 | — | (9) | — | 410 | ||||||||
| Change, net of taxes | $ | (169) | $ | 299 | $ | 731 | $ | 312 | $ | (1,496) | $ | (12) | $ | 23 | $ | (312) |
| Balance at September 30, 2023 | $ | (5,205) | $ | 197 | $ | (1,259) | $ | (5,683) | $ | (34,269) | $ | (7) | $ | 49 | $ | (46,177) |
| Nine Months Ended September 30, 2023 | ||||||||||||||||
| Balance, December 31, 2022 | $ | (5,998) | $ | 842 | $ | (2,522) | $ | (5,755) | $ | (33,637) | $ | 8 | $ | — | $ | (47,062) |
| Adjustment to opening balance, net of taxes(6) | — | — | — | — | — | — | 27 | 27 | ||||||||
| Adjusted balance, beginning of period | $ | (5,998) | $ | 842 | $ | (2,522) | $ | (5,755) | $ | (33,637) | $ | 8 | $ | 27 | $ | (47,035) |
| Other comprehensive income before reclassifications | 812 | (650) | 166 | (28) | (632) | 8 | 22 | (302) | ||||||||
| Increase (decrease) due to amounts reclassified from AOCI | (19) | 5 | 1,097 | 100 | — | (23) | — | 1,160 | ||||||||
| Change, net of taxes | $ | 793 | $ | (645) | $ | 1,263 | $ | 72 | $ | (632) | $ | (15) | $ | 22 | $ | 858 |
| Balance at September 30, 2023 | $ | (5,205) | $ | 197 | $ | (1,259) | $ | (5,683) | $ | (34,269) | $ | (7) | $ | 49 | $ | (46,177) |
| In millions of dollars | Net<br>unrealized<br>gains (losses)<br>on debt securities | Debt valuation adjustment (DVA)(1) | Cash flow hedges(2) | Benefit plans(3) | CTA, net<br><br>of hedges(4) | Excluded component of fair value hedges | Long-duration insurance contracts | Accumulated<br>other<br>comprehensive income (loss) | ||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Three Months Ended September 30, 2022 | ||||||||||||||||
| Balance, June 30, 2022 | $ | (6,392) | $ | 1,573 | $ | (2,106) | $ | (5,770) | $ | (32,810) | $ | 10 | $ | — | $ | (45,495) |
| Other comprehensive income before reclassifications | (595) | 874 | (870) | 5 | (2,423) | 31 | — | (2,978) | ||||||||
| Increase (decrease) due to amounts reclassified from AOCI | 15 | (2) | 107 | 32 | 24 | (1) | — | 175 | ||||||||
| Change, net of taxes | $ | (580) | $ | 872 | $ | (763) | $ | 37 | $ | (2,399) | $ | 30 | $ | — | $ | (2,803) |
| Balance at September 30, 2022 | $ | (6,972) | $ | 2,445 | $ | (2,869) | $ | (5,733) | $ | (35,209) | $ | 40 | $ | — | $ | (48,298) |
| Nine Months Ended September 30, 2022 | ||||||||||||||||
| Balance, December 31, 2021 | $ | (614) | $ | (1,187) | $ | 101 | $ | (5,852) | $ | (31,166) | $ | (47) | $ | — | $ | (38,765) |
| Other comprehensive income before reclassifications | (6,490) | 3,635 | (2,709) | 26 | (4,412) | 81 | — | (9,869) | ||||||||
| Increase (decrease) due to amounts reclassified from AOCI | 132 | (3) | (261) | 93 | 369 | 6 | — | 336 | ||||||||
| Change, net of taxes | $ | (6,358) | $ | 3,632 | $ | (2,970) | $ | 119 | $ | (4,043) | $ | 87 | $ | — | $ | (9,533) |
| Balance at September 30, 2022 | $ | (6,972) | $ | 2,445 | $ | (2,869) | $ | (5,733) | $ | (35,209) | $ | 40 | $ | — | $ | (48,298) |
(1)Reflects the after-tax valuation of Citi’s fair value option liabilities. See “Market Valuation Adjustments” in Note 22.
(2)Primarily driven by Citi’s pay floating/receive fixed interest rate swap programs that hedge certain floating rates on assets.
(3)Primarily reflects adjustments based on the quarterly actuarial valuations of the Company’s significant pension and postretirement plans, annual actuarial valuations of all other plans and amortization of amounts previously recognized in other comprehensive income.
(4)Primarily reflects the movements in (by order of impact) the Mexican peso, Chilean peso, Euro, Polish zloty and Brazilian real against the U.S. dollar and changes in related tax effects and hedges for the three months ended September 30, 2023. Primarily reflects the movements in (by order of impact) the Mexican peso, Russian ruble, Japanese yen, South Korean won and Chilean peso against the U.S. dollar and changes in related tax effects and hedges for the nine months ended September 30, 2023. Primarily reflects the movements in (by order of impact) the South Korean won, Euro, Russian ruble, Mexican peso, Polish zloty and Japanese yen against the U.S. dollar and changes in related tax effects and hedges for the three months ended September 30, 2022. Primarily reflects the movements in (by order of impact) the South Korean won, Euro, Japanese yen, Indian rupee, Chinese yuan and British pound sterling against the U.S. dollar and changes in related tax effects and hedges for the nine months ended September 30, 2022. Amounts recorded in the CTA component of AOCI remain in AOCI until the sale or substantial liquidation of the foreign entity, at which point such amounts related to the foreign entity are reclassified into earnings.
(5)Reflects the change in the liability for future policyholder benefits for certain long-duration life-contingent annuity contracts that are issued by a regulated Citi insurance subsidiary in Mexico and reported within Legacy Franchises. The amount reflects the change in the liability after discounting using an upper-medium grade fixed income instrument yield that reflects the duration characteristics of the liability. As of September 30, 2023, the balance of the liability for future policyholder benefits, which is recorded within Other Liabilities, for this insurance subsidiary was approximately $519 million.
(6)See Note 1.
The pretax and after-tax changes in each component of Accumulated other comprehensive income (loss) were as follows:
| In millions of dollars | Pretax | Tax effect(1) | After-tax | |||
|---|---|---|---|---|---|---|
| Three Months Ended September 30, 2023 | ||||||
| Balance, June 30, 2023 | $ | (53,964) | $ | 8,099 | $ | (45,865) |
| Change in net unrealized gains (losses) on debt securities | (227) | 58 | (169) | |||
| Debt valuation adjustment (DVA) | 395 | (96) | 299 | |||
| Cash flow hedges | 958 | (227) | 731 | |||
| Benefit plans | 380 | (68) | 312 | |||
| Foreign currency translation adjustment (CTA) | (1,532) | 36 | (1,496) | |||
| Excluded component of fair value hedges | (10) | (2) | (12) | |||
| Long-duration insurance contracts | 33 | (10) | 23 | |||
| Change | $ | (3) | $ | (309) | $ | (312) |
| Balance at September 30, 2023 | $ | (53,967) | $ | 7,790 | $ | (46,177) |
| Nine Months Ended September 30, 2023 | ||||||
| Balance, December 31, 2022 | $ | (55,253) | $ | 8,191 | $ | (47,062) |
| Adjustment to opening balance(2) | 39 | (12) | 27 | |||
| Adjusted balance, beginning of period | $ | (55,214) | $ | 8,179 | $ | (47,035) |
| Change in net unrealized gains (losses) on debt securities | 1,095 | (302) | 793 | |||
| DVA | (875) | 230 | (645) | |||
| Cash flow hedges | 1,670 | (407) | 1,263 | |||
| Benefit plans | 68 | 4 | 72 | |||
| CTA | (728) | 96 | (632) | |||
| Excluded component of fair value hedges | (14) | (1) | (15) | |||
| Long-duration insurance contracts | 31 | (9) | 22 | |||
| Change | $ | 1,247 | $ | (389) | $ | 858 |
| Balance at September 30, 2023 | $ | (53,967) | $ | 7,790 | $ | (46,177) |
| In millions of dollars | Pretax | Tax effect(1) | After-tax | |||
| --- | --- | --- | --- | --- | --- | --- |
| Three Months Ended September 30, 2022 | ||||||
| Balance, June 30, 2022 | $ | (53,566) | $ | 8,071 | $ | (45,495) |
| Change in net unrealized gains (losses) on debt securities | (850) | 270 | (580) | |||
| DVA | 1,159 | (287) | 872 | |||
| Cash flow hedges | (1,025) | 262 | (763) | |||
| Benefit plans | (4) | 41 | 37 | |||
| CTA | (2,238) | (161) | (2,399) | |||
| Excluded component of fair value hedges | 40 | (10) | 30 | |||
| Long-duration insurance contracts | — | — | — | |||
| Change | $ | (2,918) | $ | 115 | $ | (2,803) |
| Balance, September 30, 2022 | $ | (56,484) | $ | 8,186 | $ | (48,298) |
| Nine Months Ended September 30, 2022 | ||||||
| Balance, December 31, 2021 | $ | (45,383) | $ | 6,618 | $ | (38,765) |
| Change in net unrealized gains (losses) on debt securities | (8,464) | 2,106 | (6,358) | |||
| DVA | 4,800 | (1,168) | 3,632 | |||
| Cash flow hedges | (3,933) | 963 | (2,970) | |||
| Benefit plans | 100 | 19 | 119 | |||
| CTA | (3,720) | (323) | (4,043) | |||
| Excluded component of fair value hedges | 116 | (29) | 87 | |||
| Long-duration insurance contracts | — | — | — | |||
| Change | $ | (11,101) | $ | 1,568 | $ | (9,533) |
| Balance, September 30, 2022 | $ | (56,484) | $ | 8,186 | $ | (48,298) |
(1) Income tax effects of these items are released from AOCI contemporaneously with the related gross pretax amount.
(2) See Note 1.
The Company recognized pretax (gains) losses related to amounts in AOCI reclassified to the Consolidated Statement of Income as follows:
| Increase (decrease) in AOCI due to <br>amounts reclassified to <br>Consolidated Statement of Income | ||||||||
|---|---|---|---|---|---|---|---|---|
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||
| In millions of dollars | 2023 | 2022 | 2023 | 2022 | ||||
| Realized (gains) losses on sales of investments | $ | (30) | $ | (52) | $ | (151) | $ | (74) |
| Gross impairment losses | 43 | 74 | 137 | 254 | ||||
| Subtotal, pretax | $ | 13 | $ | 22 | $ | (14) | $ | 180 |
| Tax effect | (6) | (7) | (5) | (48) | ||||
| Net realized (gains) losses on investments, after-tax(1) | $ | 7 | $ | 15 | $ | (19) | $ | 132 |
| Realized DVA (gains) losses on fair value option liabilities, pretax | $ | 12 | $ | (3) | $ | 8 | $ | (4) |
| Tax effect | (3) | 1 | (3) | 1 | ||||
| Net realized DVA, after-tax | $ | 9 | $ | (2) | $ | 5 | $ | (3) |
| Interest rate contracts | $ | 480 | $ | 141 | $ | 1,444 | $ | (344) |
| Foreign exchange contracts | 1 | 1 | 3 | 3 | ||||
| Subtotal, pretax | $ | 481 | $ | 142 | $ | 1,447 | $ | (341) |
| Tax effect | (116) | (35) | (350) | 80 | ||||
| Amortization of cash flow hedges, after-tax(2) | $ | 365 | $ | 107 | $ | 1,097 | $ | (261) |
| Amortization of unrecognized: | ||||||||
| Prior service cost (benefit) | $ | (6) | $ | (6) | $ | (17) | $ | (17) |
| Net actuarial loss | 52 | 49 | 152 | 177 | ||||
| Curtailment/settlement impact(3) | 5 | — | 1 | (33) | ||||
| Subtotal, pretax | $ | 51 | $ | 43 | $ | 136 | $ | 127 |
| Tax effect | (13) | (11) | (36) | (34) | ||||
| Amortization of benefit plans, after-tax(3) | $ | 38 | $ | 32 | $ | 100 | $ | 93 |
| Excluded component of fair value hedges, pretax | $ | (12) | $ | (1) | $ | (31) | $ | 9 |
| Tax effect | 3 | — | 8 | (3) | ||||
| Excluded component of fair value hedges, after-tax | $ | (9) | $ | (1) | $ | (23) | $ | 6 |
| Long-duration insurance contracts, pretax | $ | — | $ | — | $ | — | $ | — |
| Tax effect | — | — | — | — | ||||
| Long-duration insurance contracts, after-tax | $ | — | $ | — | $ | — | $ | — |
| CTA, pretax | $ | — | $ | 26 | $ | — | $ | 423 |
| Tax effect | — | (2) | — | (54) | ||||
| CTA, after-tax(4) | $ | — | $ | 24 | $ | — | $ | 369 |
| Total amounts reclassified out of AOCI, pretax | $ | 545 | $ | 229 | $ | 1,546 | $ | 394 |
| Total tax effect | (135) | (54) | (386) | (58) | ||||
| Total amounts reclassified out of AOCI, after-tax | $ | 410 | $ | 175 | $ | 1,160 | $ | 336 |
(1)The pretax amount is reclassified to Realized gains (losses) on sales of investments, net and Gross impairment losses in the Consolidated Statement of Income. See Note 12 for additional details.
(2)See Note 21 for additional details.
(3)See Note 8 for additional details.
(4)The pretax amount is reclassified to Discontinued operations and Other revenue in the Consolidated Statement of Income, and results from the substantial liquidation of a legacy U.K. consumer operation. See Note 2 for additional details.
19. PREFERRED STOCK
The following table summarizes the Company’s preferred stock outstanding:
| Dividend rate as of September 30, 2023 | Redemption<br>price per depositary share/preference share | Carrying value<br><br>(in millions of dollars) | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Issuance date | Redeemable by issuer beginning | Number<br>of depositary<br>shares | September 30,<br>2023 | December 31,<br>2022 | ||||||||||
| Series A(1) | October 29, 2012 | January 30, 2023 | N/A | $ | 1,000 | 1,500,000 | $ | — | $ | 1,500 | ||||
| Series B(2) | December 13, 2012 | February 15, 2023 | N/A | 1,000 | 750,000 | — | 750 | |||||||
| Series D(3) | April 30, 2013 | May 15, 2023 | 3-month SOFR+<br><br>3.72761 | 1,000 | 1,250,000 | 1,250 | 1,250 | |||||||
| Series J(4) | September 19, 2013 | September 30, 2023 | 3-month SOFR+<br><br>4.30161 | 25 | 38,000,000 | 950 | 950 | |||||||
| Series K(5) | October 31, 2013 | November 15, 2023 | 6.875 | % | 25 | 59,800,000 | 1,495 | 1,495 | ||||||
| Series M(6) | April 30, 2014 | May 15, 2024 | 6.300 | 1,000 | 1,750,000 | 1,750 | 1,750 | |||||||
| Series P(7) | April 24, 2015 | May 15, 2025 | 5.950 | 1,000 | 2,000,000 | 2,000 | 2,000 | |||||||
| Series T(8) | April 25, 2016 | August 15, 2026 | 6.250 | 1,000 | 1,500,000 | 1,500 | 1,500 | |||||||
| Series U(9) | September 12, 2019 | September 12, 2024 | 5.000 | 1,000 | 1,500,000 | 1,500 | 1,500 | |||||||
| Series V(10) | January 23, 2020 | January 30, 2025 | 4.700 | 1,000 | 1,500,000 | 1,500 | 1,500 | |||||||
| Series W(11) | December 10, 2020 | December 10, 2025 | 4.000 | 1,000 | 1,500,000 | 1,500 | 1,500 | |||||||
| Series X(12) | February 18, 2021 | February 18, 2026 | 3.875 | 1,000 | 2,300,000 | 2,300 | 2,300 | |||||||
| Series Y(13) | October 27, 2021 | November 15, 2026 | 4.150 | 1,000 | 1,000,000 | 1,000 | 1,000 | |||||||
| Series Z(14) | March 7, 2023 | May 15, 2028 | 7.375 | 1,000 | 1,250,000 | 1,250 | — | |||||||
| Series AA(15) | September 21, 2023 | November 15, 2028 | 7.625 | 1,000 | 1,500,000 | 1,500 | — | |||||||
| $ | 19,495 | $ | 18,995 |
(1)Issued as depositary shares, each representing a 1/25th interest in a share of the corresponding series of non-cumulative perpetual preferred stock. Beginning in the second quarter of 2023, dividends are payable quarterly on January 30, April 30, July 30 and October 30 at a floating rate, in each case when, as and if declared by the Citi Board of Directors. Series A was reclassified to Short-term borrowings at the time of the announcement of redemption on September 29, 2023. Citi redeemed Series A in its entirety on October 30, 2023.
(2)Citi redeemed Series B in its entirety on August 15, 2023.
(3)Issued as depositary shares, each representing a 1/25th interest in a share of the corresponding series of non-cumulative perpetual preferred stock. Beginning in the third quarter of 2023, dividends are payable quarterly on February 15, May 15, August 15 and November 15 at a floating rate, in each case when, as and if declared by the Citi Board of Directors. The spread incorporates the contractual LIBOR-based spread and a 0.26161% tenor spread adjustment.
(4)Issued as depositary shares, each representing a 1/1,000th interest in a share of the corresponding series of non-cumulative perpetual preferred stock. Dividends are payable quarterly on March 30, June 30, September 30 and December 30 at a fixed rate until, but excluding, September 30, 2023, thereafter payable quarterly on the same dates at a floating rate, in each case when, as and if declared by the Citi Board of Directors. Beginning in the fourth quarter of 2023, dividends are payable quarterly on March 30, June 30, September 30 and December 30 at a floating rate, in each case when, as and if declared by the Citi Board of Directors. The spread incorporates the contractual LIBOR-based spread and a 0.26161% tenor spread adjustment.
(5)Issued as depositary shares, each representing a 1/1,000th interest in a share of the corresponding series of non-cumulative perpetual preferred stock. Dividends are payable quarterly on February 15, May 15, August 15 and November 15 at a fixed rate until, but excluding, November 15, 2023, thereafter payable quarterly on the same dates at a floating rate, in each case when, as and if declared by the Citi Board of Directors. As previously announced, Citi will be redeeming Series K in its entirety on November 15, 2023.
(6)Issued as depositary shares, each representing a 1/25th interest in a share of the corresponding series of non-cumulative perpetual preferred stock. Dividends are payable semiannually on May 15 and November 15 at a fixed rate until, but excluding, May 15, 2024, thereafter payable quarterly on February 15, May 15, August 15 and November 15 at a floating rate, in each case when, as and if declared by the Citi Board of Directors.
(7)Issued as depositary shares, each representing a 1/25th interest in a share of the corresponding series of non-cumulative perpetual preferred stock. Dividends are payable semiannually on May 15 and November 15 at a fixed rate until, but excluding, May 15, 2025, and thereafter payable quarterly on February 15, May 15, August 15 and November 15 at a floating rate, in each case when, as and if declared by the Citi Board of Directors.
(8)Issued as depositary shares, each representing a 1/25th interest in a share of the corresponding series of non-cumulative perpetual preferred stock. Dividends are payable semiannually on February 15 and August 15 at a fixed rate until, but excluding, August 15, 2026, thereafter payable quarterly on February 15, May 15, August 15 and November 15 at a floating rate, in each case when, as and if declared by the Citi Board of Directors.
(9)Issued as depositary shares, each representing a 1/25th interest in a share of the corresponding series of non-cumulative perpetual preferred stock. Dividends are payable semiannually on March 12 and September 12 at a fixed rate until, but excluding, September 12, 2024, thereafter payable quarterly on March 12, June 12, September 12 and December 12 at a floating rate, in each case when, as and if declared by the Citi Board of Directors.
(10)Issued as depositary shares, each representing a 1/25th interest in a share of the corresponding series of non-cumulative perpetual preferred stock. Dividends are payable semiannually on January 30 and July 30 at a fixed rate until, but excluding, January 30, 2025, thereafter payable quarterly on January 30, April 30, July 30 and October 30 at a floating rate, in each case when, as and if declared by the Citi Board of Directors.
(11)Issued as depositary shares, each representing a 1/25th interest in a share of the corresponding series of non-cumulative perpetual preferred stock. Dividends are payable quarterly on March 10, June 10, September 10 and December 10 at a fixed rate until, but excluding, December 10, 2025, thereafter payable quarterly on the same dates at a floating rate, in each case when, as and if declared by the Citi Board of Directors.
(12)Issued as depositary shares, each representing a 1/25th interest in a share of the corresponding series of non-cumulative perpetual preferred stock. Dividends are payable quarterly on February 18, May 18, August 18 and November 18 at a fixed rate until, but excluding, February 18, 2026, thereafter payable quarterly on the same dates at a floating rate, in each case when, as and if declared by the Citi Board of Directors.
(13)Issued as depositary shares, each representing a 1/25th interest in a share of the corresponding series of non-cumulative perpetual preferred stock. Dividends are payable quarterly on February 15, May 15, August 15 and November 15 at a fixed rate until, but excluding, November 15, 2026, thereafter payable quarterly on the same dates at a floating rate, in each case when, as and if declared by the Citi Board of Directors.
(14)Issued as depositary shares, each representing a 1/25th interest in a share of the corresponding series of non-cumulative perpetual preferred stock. Dividends are payable quarterly on February 15, May 15, August 15 and November 15 at a fixed rate until, but excluding, May 15, 2028, thereafter payable quarterly on the same dates at a floating rate, in each case when, as and if declared by the Citi Board of Directors.
(15)Issued as depositary shares, each representing a 1/25th interest in a share of the corresponding series of non-cumulative perpetual preferred stock. Dividends are payable quarterly on February 15, May 15, August 15 and November 15 at a fixed rate until, but excluding, November 15, 2028, thereafter payable quarterly on the same dates at a floating rate, in each case when, as and if declared by the Citi Board of Directors.
N/A Not applicable, as the series has been redeemed.
20. SECURITIZATIONS AND VARIABLE INTEREST ENTITIES
For additional information regarding Citi’s use of special purpose entities (SPEs) and variable interest entities (VIEs), see Note 22 to the Consolidated Financial Statements in Citi’s 2022 Form 10-K.
Citigroup’s involvement with consolidated and unconsolidated VIEs with which the Company holds significant variable interests or has continuing involvement through servicing a majority of the assets in a VIE is presented below:
| As of September 30, 2023 | ||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Maximum exposure to loss in significant unconsolidated VIEs(1) | ||||||||||||||||||||||||||||||||||
| Funded exposures(2) | Unfunded exposures | |||||||||||||||||||||||||||||||||
| In millions of dollars | Total<br>involvement<br>with SPE<br>assets | Consolidated<br>VIE/SPE assets | Significant<br><br>unconsolidated<br><br>VIE assets(3) | Debt<br>investments | Equity<br>investments | Funding<br>commitments | Guarantees<br>and<br>derivatives | Total | ||||||||||||||||||||||||||
| Credit card securitizations | $ | 31,203 | $ | 31,203 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||
| Mortgage securitizations(4) | ||||||||||||||||||||||||||||||||||
| U.S. agency-sponsored | 125,485 | — | 125,485 | 2,149 | — | — | 139 | 2,288 | ||||||||||||||||||||||||||
| Non-agency-sponsored | 64,111 | — | 64,111 | 3,133 | — | 130 | — | 3,263 | ||||||||||||||||||||||||||
| Citi-administered asset-backed commercial paper conduits | 20,852 | 20,852 | — | — | — | — | — | — | ||||||||||||||||||||||||||
| Collateralized loan obligations (CLOs) | 5,767 | — | 5,767 | 2,455 | — | — | — | 2,455 | ||||||||||||||||||||||||||
| Asset-based financing(5) | 190,782 | 10,652 | 180,130 | 41,613 | 927 | 12,775 | — | 55,315 | ||||||||||||||||||||||||||
| Municipal securities tender option bond trusts (TOBs) | 1,410 | 723 | 687 | 5 | — | 519 | — | 524 | ||||||||||||||||||||||||||
| Municipal investments | 21,657 | 3 | 21,654 | 2,356 | 2,884 | 2,934 | — | 8,174 | ||||||||||||||||||||||||||
| Client intermediation | 496 | 106 | 390 | 75 | — | — | — | 75 | ||||||||||||||||||||||||||
| Investment funds | 504 | 70 | 434 | 5 | 8 | 90 | — | 103 | ||||||||||||||||||||||||||
| Total | $ | 462,267 | $ | 63,609 | $ | 398,658 | $ | 51,791 | $ | 3,819 | $ | 16,448 | $ | 139 | $ | 72,197 | As of December 31, 2022 | |||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||||||||||||||||
| Maximum exposure to loss in significant unconsolidated VIEs(1) | ||||||||||||||||||||||||||||||||||
| Funded exposures(2) | Unfunded exposures | |||||||||||||||||||||||||||||||||
| In millions of dollars | Total<br>involvement<br>with SPE<br>assets | Consolidated<br>VIE/SPE assets | Significant<br><br>unconsolidated<br><br>VIE assets(3) | Debt<br>investments | Equity<br>investments | Funding<br>commitments | Guarantees<br>and<br>derivatives | Total | ||||||||||||||||||||||||||
| Credit card securitizations | $ | 32,021 | $ | 32,021 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||
| Mortgage securitizations(4) | ||||||||||||||||||||||||||||||||||
| U.S. agency-sponsored | 117,358 | — | 117,358 | 2,052 | — | — | 48 | 2,100 | ||||||||||||||||||||||||||
| Non-agency-sponsored | 67,704 | — | 67,704 | 3,294 | — | — | — | 3,294 | ||||||||||||||||||||||||||
| Citi-administered asset-backed commercial paper conduits | 19,621 | 19,621 | — | — | — | — | — | — | ||||||||||||||||||||||||||
| Collateralized loan obligations (CLOs) | 7,600 | — | 7,600 | 2,601 | — | — | — | 2,601 | ||||||||||||||||||||||||||
| Asset-based financing(5) | 242,348 | 9,672 | 232,676 | 40,121 | 1,022 | 10,726 | — | 51,869 | ||||||||||||||||||||||||||
| Municipal securities tender option bond trusts (TOBs) | 2,155 | 672 | 1,483 | 2 | — | 1,108 | — | 1,110 | ||||||||||||||||||||||||||
| Municipal investments | 22,167 | 3 | 22,164 | 2,731 | 3,143 | 3,420 | — | 9,294 | ||||||||||||||||||||||||||
| Client intermediation | 482 | 121 | 361 | 58 | — | — | 13 | 71 | ||||||||||||||||||||||||||
| Investment funds | 534 | 91 | 443 | 2 | 5 | 68 | — | 75 | ||||||||||||||||||||||||||
| Total | $ | 511,990 | $ | 62,201 | $ | 449,789 | $ | 50,861 | $ | 4,170 | $ | 15,322 | $ | 61 | $ | 70,414 |
(1) The definition of maximum exposure to loss is included in the text that follows this table.
(2) Included on Citigroup’s September 30, 2023 and December 31, 2022 Consolidated Balance Sheet.
(3) A significant unconsolidated VIE is an entity in which the Company has any variable interest or continuing involvement considered to be significant, regardless of the likelihood of loss.
(4) Citigroup mortgage securitizations also include agency and non-agency (private label) re-securitization activities. These SPEs are not consolidated.
(5) Included within this line are loans to third-party-sponsored private equity funds, which represent $6 billion and $69 billion in unconsolidated VIE assets and $283 million and $498 million in maximum exposure to loss as of September 30, 2023 and December 31, 2022, respectively.
The previous tables do not include:
•certain investment funds for which the Company provides investment management services and personal estate trusts for which the Company provides administrative, trustee and/or investment management services;
•certain third-party-sponsored private equity funds to which the Company provides secured credit facilities. The Company has no decision-making power and does not consolidate these funds, some of which may meet the definition of a VIE. The Company’s maximum exposure to loss is generally limited to a loan or lending-related commitment. As of September 30, 2023 and December 31, 2022, the Company’s maximum exposure to loss related to these transactions was $13.8 billion and $33.6 billion, respectively (for more information on these positions, see Note 13 and Note 27 to the Consolidated Financial Statements in Citi’s 2022 Form 10-K);
•certain VIEs structured by third parties in which the Company holds securities in inventory, as these investments are made on arm’s-length terms;
•certain positions in mortgage- and asset-backed securities held by the Company, which are classified as Trading account assets or Investments, in which the Company has no other involvement with the related securitization entity deemed to be significant (see Notes 12 and 21 for more information on these positions);
•certain representations and warranties exposures in Citigroup residential mortgage securitizations, in which the original mortgage loan balances are no longer outstanding; and
•VIEs such as preferred securities trusts used in connection with the Company’s funding activities. The Company does not have a variable interest in these trusts.
The asset balances for consolidated VIEs represent the carrying amounts of the assets consolidated by the Company. The carrying amount may represent the amortized cost or the current fair value of the assets depending on the classification of the asset (e.g., loan or security) and the associated accounting model ascribed to that classification.
The asset balances for unconsolidated VIEs in which the Company has significant involvement represent the most current information available to the Company. In most cases, the asset balances represent an amortized cost basis without regard to impairments, unless fair value information is readily available to the Company.
The maximum funded exposure represents the balance sheet carrying amount of the Company’s investment in the VIE. It reflects the initial amount of cash invested in the VIE, adjusted for any accrued interest and cash principal payments received. The carrying amount may also be adjusted for increases or declines in fair value or any impairment in value recognized in earnings. The maximum exposure of unfunded positions represents the remaining undrawn committed amount, including liquidity and credit facilities provided by the Company or the notional amount of a derivative instrument considered to be a variable interest. In certain transactions, the Company has entered into derivative instruments or other arrangements that are not considered variable interests in the VIE (e.g., interest rate swaps, cross-currency swaps or where the Company is the purchaser of credit protection under a credit default swap or total return swap where the Company pays the total return on certain assets to the SPE). Receivables under such arrangements are not included in the maximum exposure amounts.
The following tables present certain assets and liabilities of consolidated variable interest entities (VIEs), which are included on Citi’s Consolidated Balance Sheet. The assets include those assets that can only be used to settle obligations of consolidated VIEs and are in excess of those obligations. In addition, the assets include third-party assets of consolidated VIEs only and exclude intercompany balances that eliminate in consolidation. The liabilities include third-party liabilities of consolidated VIEs only and exclude intercompany balances that eliminate in consolidation. The liabilities also exclude amounts where creditors or beneficial interest holders have recourse to the general credit of Citigroup.
| September 30, | ||||
|---|---|---|---|---|
| 2023 | December 31, | |||
| In millions of dollars | (Unaudited) | 2022 | ||
| Assets of consolidated VIEs to be used to settle obligations of consolidated VIEs | ||||
| Cash and due from banks | $ | 33 | $ | 61 |
| Trading account assets | 9,990 | 9,153 | ||
| Investments | 651 | 594 | ||
| Loans, net of unearned income | ||||
| Consumer | 34,349 | 35,026 | ||
| Corporate | 20,975 | 19,782 | ||
| Loans, net of unearned income | $ | 55,324 | $ | 54,808 |
| Allowance for credit losses on loans (ACLL) | (2,527) | (2,520) | ||
| Total loans, net | $ | 52,797 | $ | 52,288 |
| Other assets | 138 | 105 | ||
| Total assets of consolidated VIEs to be used to settle obligations of consolidated VIEs | $ | 63,609 | $ | 62,201 |
| September 30, | ||||
| --- | --- | --- | --- | --- |
| 2023 | December 31, | |||
| In millions of dollars | (Unaudited) | 2022 | ||
| Liabilities of consolidated VIEs for which creditors or beneficial interest holders <br>do not have recourse to the general credit of Citigroup | ||||
| Short-term borrowings | $ | 9,657 | $ | 9,807 |
| Long-term debt | 7,340 | 10,324 | ||
| Other liabilities | 835 | 622 | ||
| Total liabilities of consolidated VIEs for which creditors or beneficial interest holders <br>do not have recourse to the general credit of Citigroup | $ | 17,832 | $ | 20,753 |
Funding Commitments for Significant Unconsolidated VIEs—Liquidity Facilities and Loan Commitments
The following table presents the notional amount of liquidity facilities and loan commitments that are classified as funding commitments in the VIE tables above:
| September 30, 2023 | December 31, 2022 | |||||||
|---|---|---|---|---|---|---|---|---|
| In millions of dollars | Liquidity<br>facilities | Loan/equity<br>commitments | Liquidity<br>facilities | Loan/equity<br>commitments | ||||
| Non-agency-sponsored mortgage securitizations | $ | — | $ | 130 | $ | — | $ | — |
| Asset-based financing | — | 12,775 | — | 10,726 | ||||
| Municipal securities tender option bond trusts (TOBs) | 519 | — | 1,108 | — | ||||
| Municipal investments | — | 2,934 | — | 3,420 | ||||
| Investment funds | — | 90 | — | 68 | ||||
| Other | — | — | — | — | ||||
| Total funding commitments | $ | 519 | $ | 15,929 | $ | 1,108 | $ | 14,214 |
Significant Interests in Unconsolidated VIEs—Balance Sheet Classification
The following table presents the carrying amounts and classification of significant variable interests in unconsolidated VIEs:
| In billions of dollars | September 30, 2023 | December 31, 2022 | ||
|---|---|---|---|---|
| Cash | $ | — | $ | — |
| Trading account assets | 1.6 | 1.6 | ||
| Investments | 8.1 | 8.6 | ||
| Total loans, net of allowance | 45.3 | 44.2 | ||
| Other | 0.6 | 0.6 | ||
| Total assets | $ | 55.6 | $ | 55.0 |
Credit Card Securitizations
The Company’s primary credit card securitization activity is through two trusts—Citibank Credit Card Master Trust and Citibank Omni Trust. These trusts are consolidated entities given Citi’s continuing involvement. For additional information, see Note 22 to the Consolidated Financial Statements in Citi’s 2022 Form 10-K. There were no material cash flows arising from either proceeds from new securitizations or paydowns of maturing notes during the nine months ended September 30, 2023 and 2022.
Mortgage Securitizations
The following tables summarize selected cash flow information and retained interests related to Citigroup mortgage securitizations:
| Three Months Ended September 30, | ||||||||
|---|---|---|---|---|---|---|---|---|
| 2023 | 2022 | |||||||
| In billions of dollars | U.S. agency- <br>sponsored <br>mortgages | Non-agency- <br>sponsored <br>mortgages | U.S. agency- <br>sponsored <br>mortgages | Non-agency- <br>sponsored <br>mortgages | ||||
| Principal securitized | $ | 1.7 | $ | 0.6 | $ | 1.4 | $ | 1.1 |
| Proceeds from new securitizations | 1.7 | 0.5 | 1.4 | 1.0 | ||||
| Contractual servicing fees received | — | — | — | — | ||||
| Cash flows received on retained interests and other net cash flows | — | 0.1 | — | — | ||||
| Purchases of previously transferred financial assets | — | — | — | — | ||||
| Nine Months Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| In billions of dollars | U.S. agency- <br>sponsored <br>mortgages | Non-agency- <br>sponsored <br>mortgages | U.S. agency- <br>sponsored <br>mortgages | Non-agency- <br>sponsored <br>mortgages | ||||
| Principal securitized | $ | 4.1 | $ | 2.9 | $ | 5.4 | $ | 11.3 |
| Proceeds from new securitizations | 4.1 | 2.6 | 5.2 | 11.0 | ||||
| Contractual servicing fees received | 0.1 | — | 0.1 | — | ||||
| Cash flows received on retained interests and other net cash flows | — | 0.1 | — | 0.1 | ||||
| Purchases of previously transferred financial assets | — | — | 0.1 | — |
Note: Excludes broker-dealer re-securitization transactions.
Gains recognized on the securitization of U.S. agency-sponsored mortgages were less than $1 million each for the three and nine months ended September 30, 2023, respectively. Gains recognized on the securitization of non-agency-sponsored mortgages were $50.4 million and $64.1 million for the three and nine months ended September 30, 2023, respectively.
Gains recognized on the securitization of U.S. agency-sponsored mortgages were $1 million and $1 million for the three and nine months ended September 30, 2022, respectively. Gains recognized on the securitization of non-agency-sponsored mortgages were $21 million and $94 million for the three and nine months ended September 30, 2022, respectively.
| September 30, 2023 | December 31, 2022 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Non-agency-sponsored mortgages(1) | Non-agency-sponsored mortgages(1) | |||||||||||
| In millions of dollars | U.S. agency- <br>sponsored mortgages | Senior <br>interests(2) | Subordinated <br>interests | U.S. agency- <br>sponsored mortgages | Senior <br>interests | Subordinated <br>interests | ||||||
| Carrying value of retained interests(3) | $ | 735 | $ | 953 | $ | 951 | $ | 659 | $ | 1,119 | $ | 943 |
(1) Disclosure of non-agency-sponsored mortgages as senior and subordinated interests is indicative of the interests’ position in the capital structure of the securitization.
(2) Senior interests in non-agency-sponsored mortgages include $1.6 million related to personal loan securitizations at September 30, 2023.
(3) Retained interests consist of Level 2 and Level 3 assets depending on the observability of significant inputs. See Note 22 for more information about fair value measurements.
The following table includes information about loan delinquencies and liquidation losses for assets held in non-consolidated, non-agency-sponsored securitization entities:
| Liquidation (gains) losses | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Securitized assets | 90 days past due | Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||
| In billions of dollars, except liquidation losses in millions | Sept. 30, 2023 | Dec. 31, 2022 | Sept. 30, 2023 | Dec. 31, 2022 | 2023 | 2022 | 2023 | 2022 | ||||||||
| Securitized assets | ||||||||||||||||
| Residential mortgages(1) | $ | 28.1 | $ | 30.8 | $ | 0.4 | $ | 0.5 | $ | (0.2) | $ | 1 | $ | 4.4 | $ | 3 |
| Commercial and other | 29.2 | 28.8 | — | — | — | — | — | — | ||||||||
| Total | $ | 57.3 | $ | 59.6 | $ | 0.4 | $ | 0.5 | $ | (0.2) | $ | 1 | $ | 4.4 | $ | 3 |
(1) Securitized assets include $0.1 billion of personal loan securitizations as of September 30, 2023.
Consumer Loan Securitizations
Beginning in the third quarter of 2023, Citi relaunched a program securitizing other consumer loans into asset-backed securities. The principal securitized and the proceeds from new securitizations at September 30, 2023 were $0.5 billion and $0.3 billion, respectively. The gain recognized on the securitization of consumer loans was $3.7 million for the three months ended September 30, 2023.
Mortgage Servicing Rights (MSRs)
The fair value of Citi’s capitalized MSRs was $729 million and $647 million at September 30, 2023 and 2022, respectively. The MSRs correspond to principal loan balances of $52 billion and $48 billion as of September 30, 2023 and 2022, respectively. The following table summarizes the changes in capitalized MSRs:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||
|---|---|---|---|---|---|---|---|---|
| In millions of dollars | 2023 | 2022 | 2023 | 2022 | ||||
| Balance, beginning of period | $ | 681 | $ | 600 | $ | 665 | $ | 404 |
| Originations | 23 | 25 | 54 | 94 | ||||
| Changes in fair value of MSRs due to changes in inputs and assumptions | 42 | 37 | 61 | 195 | ||||
| Other changes(1) | (17) | (15) | (51) | (46) | ||||
| Balance, as of September 30 | $ | 729 | $ | 647 | $ | 729 | $ | 647 |
(1) Represents changes due to customer payments and passage of time.
The fair value of the MSRs is primarily affected by changes in prepayments of mortgages that result from shifts in mortgage interest rates. Specifically, higher interest rates tend to lead to declining prepayments, which causes the fair value of the MSRs to increase. In managing this risk, Citigroup economically hedges a significant portion of the value of its MSRs through the use of interest rate derivative contracts, forward purchase and sale commitments of mortgage-backed securities and purchased securities, all classified as Trading account assets.
The Company receives fees during the course of servicing previously securitized mortgages. The amounts of these fees were as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||
|---|---|---|---|---|---|---|---|---|
| In millions of dollars | 2023 | 2022 | 2023 | 2022 | ||||
| Servicing fees | $ | 32 | $ | 31 | $ | 97 | $ | 90 |
| Late fees | 1 | 1 | 3 | 3 | ||||
| Total MSR fees | $ | 33 | $ | 32 | $ | 100 | $ | 93 |
In the Consolidated Statement of Income these fees are primarily classified as Commissions and fees, and changes in MSR fair values are classified as Other revenue.
Re-securitizations
The Company engages in re-securitization transactions in which debt securities are transferred to a VIE in exchange for new beneficial interests. Citi did not transfer non-agency (private label) securities to re-securitization entities during the three months ended September 30, 2023 and 2022. These securities are backed by either residential or commercial mortgages and are often structured on behalf of clients.
As of September 30, 2023 and December 31, 2022, Citi held no retained interests in private label re-securitization transactions structured by Citi.
The Company also re-securitizes U.S. government-agency-guaranteed mortgage-backed (agency) securities. During the three and nine months ended September 30, 2023, Citi transferred agency securities with a fair value of approximately $4.3 billion and $12.8 billion, respectively, to re-securitization entities, compared to approximately $5.3 billion and $20.3 billion for the three and nine months ended September 30, 2022, respectively.
As of September 30, 2023, the fair value of Citi-retained interests in agency re-securitization transactions structured by Citi totaled approximately $1.4 billion (including $552 million related to re-securitization transactions executed in 2023), compared to $1.4 billion as of December 31, 2022 (including $801 million related to re-securitization transactions executed in 2022), which is recorded in Trading account assets. The original fair values of agency re-securitization transactions in which Citi holds a retained interest as of September 30, 2023 and December 31, 2022 were approximately $85.9 billion and $79.4 billion, respectively.
As of September 30, 2023 and December 31, 2022, the Company did not consolidate any private label or agency re-securitization entities.
Citi-Administered Asset-Backed Commercial Paper Conduits
At September 30, 2023 and December 31, 2022, the commercial paper conduits administered by Citi had approximately $20.9 billion and $19.6 billion of purchased assets outstanding, respectively, and had unfunded commitments with clients of approximately $15.6 billion and $13.9 billion, respectively.
Substantially all of the funding of the conduits is in the form of short-term commercial paper. At September 30, 2023 and December 31, 2022, the weighted average remaining maturities of the commercial paper issued by the conduits were approximately 68 and 64 days, respectively.
Each asset purchased by the conduit is structured with transaction-specific credit enhancement, including over-collateralization, cash and excess spread collateral accounts, direct recourse or third-party guarantees. Credit enhancement is sized with the objective of approximating an investment-grade credit rating, based on Citi’s internal risk ratings. In addition to the transaction-specific credit enhancement, the conduits have obtained letters of credit from the Company that equal at least 8% to 10% of the conduit’s assets with a minimum of $200 million to $350 million. The letters of credit provided by the Company to the conduits total approximately $1.9 billion and $1.9 billion as of September 30, 2023 and December 31, 2022, respectively. The net result across multiseller conduits administered by the Company is that, in the event that defaulted assets exceed the transaction-specific credit enhancement described above, any losses in each conduit are allocated first to the Company and then to the commercial paper investors.
At September 30, 2023 and December 31, 2022, the Company owned $9.9 billion and $8.6 billion, respectively, of the commercial paper issued by its administered conduits. The Company’s investments were not driven by market illiquidity and the Company is not obligated under any agreement to purchase the commercial paper issued by the conduits.
Municipal Securities Tender Option Bond (TOB) Trusts
At September 30, 2023 and December 31, 2022, none of the municipal bonds owned by non-customer TOB trusts were subject to a credit guarantee provided by the Company.
At September 30, 2023 and December 31, 2022, liquidity agreements provided with respect to customer TOB trusts totaled $0.5 billion and $1.1 billion, respectively, of which $0.3 billion and $0.7 billion, respectively, were offset by reimbursement agreements. For the remaining exposure related to TOB transactions, where the residual owned by the customer was at least 25% of the bond value at the inception of the transaction, no reimbursement agreement was executed.
The Company also provides other liquidity agreements or letters of credit to customer-sponsored municipal investment funds, which are not variable interest entities, and municipality-related issuers that totaled $1.3 billion and $1.4 billion as of September 30, 2023 and December 31, 2022, respectively. These liquidity agreements and letters of credit are offset by reimbursement agreements with various term-out provisions.
Asset-Based Financing
The primary types of Citi’s asset-based financings, total assets of the unconsolidated VIEs with significant involvement and Citi’s maximum exposure to loss are presented below. For Citi to realize the maximum loss, the VIE (borrower) would have to default with no recovery from the assets held by the VIE.
| September 30, 2023 | December 31, 2022 | |||||||
|---|---|---|---|---|---|---|---|---|
| In millions of dollars | Total <br>unconsolidated <br>VIE assets | Maximum <br>exposure to <br>unconsolidated VIEs | Total <br>unconsolidated <br>VIE assets | Maximum <br>exposure to <br>unconsolidated VIEs | ||||
| Type | ||||||||
| Commercial and other real estate | $ | 42,651 | $ | 9,250 | $ | 43,236 | $ | 8,806 |
| Corporate loans | 21,846 | 15,116 | 23,120 | 15,077 | ||||
| Other (including investment funds, airlines and shipping) | 115,633 | 30,949 | 166,320 | 27,986 | ||||
| Total | $ | 180,130 | $ | 55,315 | $ | 232,676 | $ | 51,869 |
21. DERIVATIVES
In the ordinary course of business, Citigroup enters into various types of derivative transactions. All derivatives are recorded in Trading account assets/Trading account liabilities on the Consolidated Balance Sheet. For additional information regarding Citi’s use of and accounting for derivatives, see Note 23 to the Consolidated Financial Statements in Citi’s 2022 Form 10-K.
Information pertaining to Citigroup’s derivatives activities, based on notional amounts, is presented in the table below. Derivative notional amounts are reference amounts from which contractual payments are derived and do not represent a complete measure of Citi’s exposure to derivative transactions. Citi’s derivative exposure arises primarily from
market fluctuations (i.e., market risk), counterparty failure (i.e., credit risk) and/or periods of high volatility or financial stress (i.e., liquidity risk), as well as any market valuation adjustments that may be required on the transactions. Moreover, notional amounts do not reflect the netting of offsetting trades. For example, if Citi enters into a receive-fixed interest rate swap with $100 million notional, and offsets this risk with an identical but opposite pay-fixed position with a different counterparty, $200 million in derivative notionals is reported, although these offsetting positions may result in de minimis overall market risk.
In addition, aggregate derivative notional amounts can fluctuate from period to period in the normal course of business based on Citi’s market share, levels of client activity and other factors.
Derivative Notionals
| Hedging instruments under ASC 815 | Trading derivative instruments | |||||||
|---|---|---|---|---|---|---|---|---|
| In millions of dollars | September 30,<br>2023 | December 31,<br>2022 | September 30,<br>2023 | December 31,<br>2022 | ||||
| Interest rate contracts | ||||||||
| Swaps | $ | 257,165 | $ | 255,280 | $ | 22,518,303 | $ | 23,780,711 |
| Futures and forwards | — | — | 3,457,157 | 2,966,025 | ||||
| Written options | — | — | 2,776,838 | 1,937,025 | ||||
| Purchased options | — | — | 2,593,989 | 1,881,291 | ||||
| Total interest rate contracts | $ | 257,165 | $ | 255,280 | $ | 31,346,287 | $ | 30,565,052 |
| Foreign exchange contracts | ||||||||
| Swaps | $ | 44,147 | $ | 48,678 | $ | 7,545,125 | $ | 6,746,070 |
| Futures, forwards and spot | 48,418 | 43,666 | 4,209,683 | 3,350,341 | ||||
| Written options | — | — | 829,689 | 789,077 | ||||
| Purchased options | — | — | 823,706 | 783,591 | ||||
| Total foreign exchange contracts | $ | 92,565 | $ | 92,344 | $ | 13,408,203 | $ | 11,669,079 |
| Equity contracts | ||||||||
| Swaps | $ | — | $ | — | $ | 291,691 | $ | 266,115 |
| Futures and forwards | — | — | 94,385 | 76,935 | ||||
| Written options | — | — | 622,464 | 482,266 | ||||
| Purchased options | — | — | 504,349 | 387,766 | ||||
| Total equity contracts | $ | — | $ | — | $ | 1,512,889 | $ | 1,213,082 |
| Commodity and other contracts | ||||||||
| Swaps | $ | — | $ | — | $ | 85,144 | $ | 90,884 |
| Futures and forwards | 2,948 | 1,571 | 164,020 | 165,314 | ||||
| Written options | — | — | 54,286 | 45,862 | ||||
| Purchased options | — | — | 51,815 | 48,197 | ||||
| Total commodity and other contracts | $ | 2,948 | $ | 1,571 | $ | 355,265 | $ | 350,257 |
| Credit derivatives(1) | ||||||||
| Protection sold | $ | — | $ | — | $ | 765,188 | $ | 593,136 |
| Protection purchased | — | — | 828,691 | 641,639 | ||||
| Total credit derivatives | $ | — | $ | — | $ | 1,593,879 | $ | 1,234,775 |
| Total derivative notionals | $ | 352,678 | $ | 349,195 | $ | 48,216,523 | $ | 45,032,245 |
(1)Credit derivatives are arrangements designed to allow one party (protection purchaser) to transfer the credit risk of a “reference asset” to another party (protection seller). These arrangements allow a protection seller to assume the credit risk associated with the reference asset without directly purchasing that asset. The Company enters into credit derivative positions for purposes such as risk management, yield enhancement, reduction of credit concentrations and diversification of overall risk.
The following tables present the gross and net fair values of the Company’s derivative transactions and the related offsetting amounts as of September 30, 2023 and December 31, 2022. Gross positive fair values are offset against gross negative fair values by counterparty, pursuant to enforceable master netting agreements. Under ASC 815-10-45, payables and receivables in respect of cash collateral received from or paid to a given counterparty pursuant to a credit support annex are included in the offsetting amount if a legal opinion supporting the enforceability of netting and collateral rights has been obtained. GAAP does not permit similar offsetting for security collateral.
In addition, the following tables reflect rule changes adopted by clearing organizations that require or allow entities to treat certain derivative assets, liabilities and the related variation margin as settlement of the related derivative fair values for legal and accounting purposes, as opposed to presenting gross derivative assets and liabilities that are subject to collateral, whereby the counterparties would also record a related collateral payable or receivable. The tables also present amounts that are not permitted to be offset, such as security collateral or cash collateral posted at third-party custodians, but which would be eligible for offsetting to the extent that an event of default has occurred and a legal opinion supporting enforceability of the netting and collateral rights has been obtained.
Derivative Mark-to-Market (MTM) Receivables/Payables
| Derivatives classified in <br>Trading account assets/liabilities(1)(2) | ||||
|---|---|---|---|---|
| In millions of dollars at September 30, 2023 | Assets | Liabilities | ||
| Derivatives instruments designated as ASC 815 hedges | ||||
| Over-the-counter | $ | 351 | $ | 7 |
| Cleared | 422 | 22 | ||
| Interest rate contracts | $ | 773 | $ | 29 |
| Over-the-counter | $ | 1,553 | $ | 1,747 |
| Cleared | 2 | — | ||
| Foreign exchange contracts | $ | 1,555 | $ | 1,747 |
| Total derivatives instruments designated as ASC 815 hedges | $ | 2,328 | $ | 1,776 |
| Derivatives instruments not designated as ASC 815 hedges | ||||
| Over-the-counter | $ | 124,279 | $ | 119,409 |
| Cleared | 53,859 | 53,634 | ||
| Exchange traded | 207 | 187 | ||
| Interest rate contracts | $ | 178,345 | $ | 173,230 |
| Over-the-counter | $ | 172,079 | $ | 164,527 |
| Cleared | 679 | 659 | ||
| Exchange traded | 4 | 18 | ||
| Foreign exchange contracts | $ | 172,762 | $ | 165,204 |
| Over-the-counter | $ | 19,000 | $ | 22,006 |
| Cleared | 19 | 120 | ||
| Exchange traded | 24,034 | 24,373 | ||
| Equity contracts | $ | 43,053 | $ | 46,499 |
| Over-the-counter | $ | 15,460 | $ | 16,226 |
| Exchange traded | 827 | 1,034 | ||
| Commodity and other contracts | $ | 16,287 | $ | 17,260 |
| Over-the-counter | $ | 6,922 | $ | 5,744 |
| Cleared | 5,720 | 5,333 | ||
| Credit derivatives | $ | 12,642 | $ | 11,077 |
| Total derivatives instruments not designated as ASC 815 hedges | $ | 423,089 | $ | 413,270 |
| Total derivatives | $ | 425,417 | $ | 415,046 |
| Less: Netting agreements(3) | $ | (333,991) | $ | (333,991) |
| Less: Netting cash collateral received/paid(4) | (22,872) | (26,294) | ||
| Net receivables/payables included on the Consolidated Balance Sheet(5) | $ | 68,554 | $ | 54,761 |
| Additional amounts subject to an enforceable master netting agreement, <br>but not offset on the Consolidated Balance Sheet | ||||
| Less: Cash collateral received/paid | $ | (818) | $ | (254) |
| Less: Non-cash collateral received/paid | (2,933) | (10,741) | ||
| Total net receivables/payables(5) | $ | 64,803 | $ | 43,766 |
(1)The derivative fair values are also presented in Note 22.
(2)Over-the-counter (OTC) derivatives are derivatives executed and settled bilaterally with counterparties without the use of an organized exchange or central clearing house. Cleared derivatives include derivatives executed bilaterally with a counterparty in the OTC market, but then novated to a central clearing house, whereby the central clearing house becomes the counterparty to both of the original counterparties. Exchange-traded derivatives include derivatives executed directly on an organized exchange that provides pre-trade price transparency.
(3)Represents the netting of balances with the same counterparty under enforceable netting agreements. Approximately $255 billion, $56 billion and $23 billion of the netting against trading account asset/liability balances is attributable to each of the OTC, cleared and exchange-traded derivatives, respectively.
(4)Represents the netting of cash collateral paid and received by counterparties under enforceable credit support agreements. Substantially all netting of cash collateral received and paid is against OTC derivative assets and liabilities, respectively.
(5)The net receivables/payables include approximately $4 billion of derivative asset and $9 billion of derivative liability fair values not subject to enforceable master netting agreements, respectively.
| Derivatives classified in <br>Trading account assets/liabilities(1)(2) | ||||
|---|---|---|---|---|
| In millions of dollars at December 31, 2022 | Assets | Liabilities | ||
| Derivatives instruments designated as ASC 815 hedges | ||||
| Over-the-counter | $ | 468 | $ | 1 |
| Cleared | 129 | 101 | ||
| Interest rate contracts | $ | 597 | $ | 102 |
| Over-the-counter | $ | 2,288 | $ | 1,766 |
| Cleared | 3 | 3 | ||
| Foreign exchange contracts | $ | 2,291 | $ | 1,769 |
| Total derivatives instruments designated as ASC 815 hedges | $ | 2,888 | $ | 1,871 |
| Derivatives instruments not designated as ASC 815 hedges | ||||
| Over-the-counter | $ | 126,844 | $ | 119,854 |
| Cleared | 50,515 | 52,566 | ||
| Exchange traded | 248 | 98 | ||
| Interest rate contracts | $ | 177,607 | $ | 172,518 |
| Over-the-counter | $ | 184,869 | $ | 183,578 |
| Cleared | 502 | 643 | ||
| Exchange traded | 1 | 5 | ||
| Foreign exchange contracts | $ | 185,372 | $ | 184,226 |
| Over-the-counter | $ | 19,674 | $ | 21,871 |
| Cleared | 1 | 4 | ||
| Exchange traded | 22,732 | 21,908 | ||
| Equity contracts | $ | 42,407 | $ | 43,783 |
| Over-the-counter | $ | 27,285 | $ | 24,912 |
| Exchange traded | 1,039 | 1,406 | ||
| Commodity and other contracts | $ | 28,324 | $ | 26,318 |
| Over-the-counter | $ | 6,836 | $ | 5,807 |
| Cleared | 1,553 | 1,970 | ||
| Credit derivatives | $ | 8,389 | $ | 7,777 |
| Total derivatives instruments not designated as ASC 815 hedges | $ | 442,099 | $ | 434,622 |
| Total derivatives | $ | 444,987 | $ | 436,493 |
| Less: Netting agreements(3) | $ | (346,545) | $ | (346,545) |
| Less: Netting cash collateral received/paid(4) | (23,136) | (30,032) | ||
| Net receivables/payables included on the Consolidated Balance Sheet(5) | $ | 75,306 | $ | 59,916 |
| Additional amounts subject to an enforceable master netting agreement, <br>but not offset on the Consolidated Balance Sheet | ||||
| Less: Cash collateral received/paid | $ | (1,455) | $ | (2,272) |
| Less: Non-cash collateral received/paid | (5,923) | (13,475) | ||
| Total net receivables/payables(5) | $ | 67,928 | $ | 44,169 |
(1)The derivative fair values are also presented in Note 22.
(2)OTC derivatives are derivatives executed and settled bilaterally with counterparties without the use of an organized exchange or central clearing house. Cleared derivatives include derivatives executed bilaterally with a counterparty in the OTC market, but then novated to a central clearing house, whereby the central clearing house becomes the counterparty to both of the original counterparties. Exchange-traded derivatives include derivatives executed directly on an organized exchange that provides pre-trade price transparency.
(3)Represents the netting of balances with the same counterparty under enforceable netting agreements. Approximately $276 billion, $49 billion and $22 billion of the netting against trading account asset/liability balances is attributable to each of the OTC, cleared and exchange-traded derivatives, respectively.
(4)Represents the netting of cash collateral paid and received by counterparties under enforceable credit support agreements. Substantially all netting of cash collateral received and paid is against OTC derivative assets and liabilities, respectively.
(5)The net receivables/payables include approximately $14 billion of derivative asset and $11 billion of derivative liability fair values not subject to enforceable master netting agreements, respectively.
For the three and nine months ended September 30, 2023 and 2022, amounts recognized in Principal transactions in the Consolidated Statement of Income include certain derivatives not designated in a qualifying hedging relationship. Citigroup presents this disclosure by business classification, showing derivative gains and losses related to its trading activities together with gains and losses related to non-derivative instruments within the same trading portfolios, as this represents how these portfolios are risk managed. See Note 6 for further information.
The amounts recognized in Other revenue in the Consolidated Statement of Income related to derivatives not designated in a qualifying hedging relationship are presented below. The table below does not include any offsetting gains (losses) on the economically hedged items to the extent that such amounts are also recorded in Other revenue.
| Gains (losses) included in <br>Other revenue | ||||||||
|---|---|---|---|---|---|---|---|---|
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||
| In millions of dollars | 2023 | 2022 | 2023 | 2022 | ||||
| Interest rate contracts | $ | (16) | $ | 26 | $ | (47) | $ | 170 |
| Foreign exchange | (46) | (33) | (113) | (114) | ||||
| Total | $ | (62) | $ | (7) | $ | (160) | $ | 56 |
Fair Value Hedges
For additional information regarding Citi’s fair value hedges, see Note 23 to the Consolidated Financial Statements in Citi’s 2022 Form 10-K.
The following table summarizes the gains (losses) on the Company’s fair value hedges:
| Gains (losses) on fair value hedges(1) | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| In millions of dollars | Other revenue | Net interest income | Other revenue | Net interest income | Other <br>revenue | Net interest income | Other revenue | Net interest income | ||||||||
| Gain (loss) on the hedging derivatives included in assessment of the effectiveness of fair value hedges | ||||||||||||||||
| Interest rate hedges | $ | — | $ | 19 | $ | — | $ | (1,855) | $ | — | $ | (473) | $ | — | $ | (8,238) |
| Foreign exchange hedges | (577) | — | (964) | — | 709 | — | (2,623) | — | ||||||||
| Commodity hedges(4) | 289 | — | (977) | — | (36) | — | (362) | — | ||||||||
| Total gain (loss) on the hedging derivatives included in assessment of the effectiveness of fair value hedges | $ | (288) | $ | 19 | $ | (1,941) | $ | (1,855) | $ | 673 | $ | (473) | $ | (2,985) | $ | (8,238) |
| Gain (loss) on the hedged item in designated and qualifying fair value hedges | ||||||||||||||||
| Interest rate hedges | $ | — | $ | (21) | $ | — | $ | 1,793 | $ | — | $ | 460 | $ | — | $ | 8,036 |
| Foreign exchange hedges | 577 | — | 964 | — | (709) | — | 2,621 | — | ||||||||
| Commodity hedges(4) | (289) | — | 977 | — | 36 | — | 362 | — | ||||||||
| Total gain (loss) on the hedged item in designated and qualifying fair value hedges | $ | 288 | $ | (21) | $ | 1,941 | $ | 1,793 | $ | (673) | $ | 460 | $ | 2,983 | $ | 8,036 |
| Net gain (loss) on the hedging derivatives excluded from assessment of the effectiveness of fair value hedges | ||||||||||||||||
| Interest rate hedges | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | (11) |
| Foreign exchange hedges(2) | 9 | — | 79 | — | 33 | — | 183 | — | ||||||||
| Commodity hedges(3)(4) | 100 | — | 7 | — | 201 | — | 30 | — | ||||||||
| Total net gain (loss) on the hedging derivatives excluded from assessment of the effectiveness of fair value hedges | $ | 109 | $ | — | $ | 86 | $ | — | $ | 234 | $ | — | $ | 213 | $ | (11) |
(1)Gain (loss) amounts for interest rate risk hedges are included in Interest income/Interest expense. The accrued interest income on fair value hedges is recorded in Net interest income and is excluded from this table. Amounts included both hedges of AFS securities and long-term debt on a net basis, which largely offset in the current period.
(2)Amounts related to the forward points (i.e., the spot-forward difference) that are excluded from the assessment of hedge effectiveness and are generally reflected directly in earnings under the mark-to-market approach. Amounts related to cross-currency basis, which are recognized in AOCI, are not reflected in the table above. The amount of cross-currency basis included in AOCI was $(10) million and $(14) million for the three and nine months ended September 30, 2023 and $40 million and $116 million for the three and nine months ended September 30, 2022, respectively.
(3)Amounts related to the forward points (i.e., the spot-forward difference) that are excluded from the assessment of hedge effectiveness reflected directly in earnings under the mark-to-market approach or recorded in AOCI under the amortization approach. The quarter ended September 30, 2023 includes gain (loss) of approximately $93 million and $7 million under the mark-to-market approach and amortization approach, respectively. The quarter ended September 30, 2022 includes gain (loss) of approximately $2 million and $5 million under the mark-to-market approach and amortization approach, respectively.
(4)The gain (loss) amounts for commodity hedges are included in Principal transactions for periods beginning 2023.
Cumulative Basis Adjustment
Upon electing to apply ASC 815 fair value hedge accounting, the carrying value of the hedged item is adjusted to reflect the cumulative changes in the hedged risk. This cumulative basis adjustment becomes part of the carrying amount of the hedged item until the hedged item is derecognized from the balance sheet. The table below presents the carrying amount of Citi’s hedged assets and liabilities under qualifying fair value hedges at September 30, 2023 and December 31, 2022, along with the cumulative basis adjustments included in the carrying value of those hedged assets and liabilities that would reverse through earnings in future periods.
| In millions of dollars | ||||||||
|---|---|---|---|---|---|---|---|---|
| Balance sheet line item in which hedged item is recorded | Carrying amount of hedged asset/ liability(1) | Cumulative basis adjustment increasing (decreasing) the carrying amount | ||||||
| Active | De-designated | |||||||
| As of September 30, 2023 | ||||||||
| Debt securities AFS(2)(5) | $ | 95,301 | $ | (3,180) | $ | (343) | ||
| Corporate loans(3) | 4,782 | (171) | — | |||||
| Long-term debt | 137,360 | (3,330) | (4,968) | |||||
| As of December 31, 2022 | ||||||||
| Debt securities AFS(4)(5) | $ | 98,837 | $ | (2,976) | $ | (333) | ||
| Long-term debt | 144,549 | (5,040) | (3,399) |
(1)Excludes physical commodities inventories with a carrying value of approximately $7 billion as of September 30, 2023, which includes cumulative basis adjustments of approximately $113 million for active hedges.
(2)These amounts include a cumulative basis adjustment of $(542) million for active hedges and $(294) million for de-designated hedges as of September 30, 2023, related to certain financial assets previously designated as the hedged item in a fair value hedge using the portfolio layer approach. The Company designated approximately $13 billion as the hedged amount (from a closed portfolio of financial assets with a carrying value of $19 billion as of September 30, 2023) in a portfolio layer hedging relationship.
(3)All hedged corporate loans are designated in a fair value hedge using the portfolio layer approach. The Company designated approximately $3.8 billion as the hedged amount (from a closed portfolio of financial assets with a carrying value of $4.8 billion as of September 30, 2023).
(4)These amounts include a cumulative basis adjustment of $(91) million for active hedges and $(309) million for de-designated hedges as of December 31, 2022, related to certain prepayable financial assets previously designated as the hedged item in a fair value hedge using the last-of-layer approach. The Company designated approximately $3 billion as the hedged amount (from a closed portfolio of prepayable financial assets with a carrying value of $11 billion as of December 31, 2022) in a last-of-layer hedging relationship.
(5)Carrying amount represents the amortized cost.
Cash Flow Hedges
Citigroup hedges the variability of forecasted cash flows due to changes in contractually specified interest rates associated with floating-rate assets/liabilities and other forecasted transactions. These cash flow hedging relationships use either regression analysis or dollar-offset ratio analysis to assess whether the hedging relationships are highly effective at inception and on an ongoing basis.
For cash flow hedges, the entire change in the fair value of the hedging derivative is recognized in AOCI and then reclassified to earnings in the same period that the forecasted hedged cash flows impact earnings. The net gain (loss) associated with cash flow hedges expected to be reclassified from AOCI within 12 months of September 30, 2023 is approximately $(1.0) billion. The maximum length of time over which forecasted cash flows are hedged is 15 years.
The pretax change in AOCI from cash flow hedges is presented below. The after-tax impact of cash flow hedges on AOCI is shown in Note 18.
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| In millions of dollars | 2023 | 2022 | 2023 | 2022 | ||||||||||||
| Amount of gain (loss) recognized in AOCI on derivatives | ||||||||||||||||
| Interest rate contracts | $ | 467 | $ | (1,196) | $ | 208 | $ | (3,637) | ||||||||
| Foreign exchange contracts | 10 | 29 | 15 | 45 | ||||||||||||
| Total gain (loss) recognized in AOCI | $ | 477 | $ | (1,167) | $ | 223 | $ | (3,592) | ||||||||
| Other <br>revenue | Net <br>interest <br>income | Other <br>revenue | Net <br>interest <br>income | Other <br>revenue | Net interest <br>income | Other <br>revenue | Net <br>interest <br>income | |||||||||
| Amount of gain (loss) reclassified from AOCI to earnings(1) | ||||||||||||||||
| Interest rate contracts | $ | — | $ | (480) | $ | — | $ | (141) | $ | — | $ | (1,444) | $ | — | $ | 344 |
| Foreign exchange contracts | (1) | — | (1) | — | (3) | — | (3) | — | ||||||||
| Total gain (loss) reclassified from AOCI into earnings | $ | (1) | $ | (480) | $ | (1) | $ | (141) | $ | (3) | $ | (1,444) | $ | (3) | $ | 344 |
| Net pretax change in cash flow hedges included within AOCI | $ | 958 | $ | (1,025) | $ | 1,670 | $ | (3,933) |
(1)All amounts reclassified into earnings for interest rate contracts are included in Interest income/Interest expense (Net interest income). For all other hedges, the amounts reclassified to earnings are included primarily in Other revenue and Net interest income in the Consolidated Statement of Income.
Net Investment Hedges
Citigroup uses foreign currency forwards, cross-currency swaps, options and foreign currency-denominated debt instruments to manage the foreign exchange risk associated with Citigroup’s equity investments in several non-U.S.-dollar-functional-currency foreign subsidiaries. Citi records the change in the fair value of these hedging instruments and the translation adjustment for the investments in these foreign subsidiaries in Foreign currency translation adjustment (CTA) within AOCI.
The pretax gain (loss) recorded in CTA within AOCI, related to net investment hedges, was $363 million and $(586) million for the three and nine months ended September 30, 2023 and $812 million and $1.5 billion for the three and nine months ended September 30, 2022, respectively. The three and nine months ended September 30, 2022 include a $1 million pretax gain and $46 million pretax loss related to net investment hedges, respectively, which were reclassified from AOCI into earnings (recorded in Other revenue).
Credit Derivatives
The following tables summarize the key characteristics of Citi’s credit derivatives portfolio by counterparty and derivative form:
| Fair values | Notionals | |||||||
|---|---|---|---|---|---|---|---|---|
| In millions of dollars at September 30, 2023 | Receivable(1) | Payable(2) | Protection<br>purchased | Protection<br>sold | ||||
| By instrument | ||||||||
| Credit default swaps and options | $ | 11,031 | $ | 10,644 | $ | 805,562 | $ | 761,316 |
| Total return swaps and other | 1,611 | 433 | 23,129 | 3,872 | ||||
| Total by instrument | $ | 12,642 | $ | 11,077 | $ | 828,691 | $ | 765,188 |
| By rating of reference entity | ||||||||
| Investment grade | $ | 6,809 | $ | 5,579 | $ | 656,154 | $ | 611,363 |
| Non-investment grade | 5,833 | 5,498 | 172,537 | 153,825 | ||||
| Total by rating of reference entity | $ | 12,642 | $ | 11,077 | $ | 828,691 | $ | 765,188 |
| By maturity | ||||||||
| Within 1 year | $ | 1,471 | $ | 1,035 | $ | 154,096 | $ | 134,847 |
| From 1 to 5 years | 8,977 | 8,149 | 578,360 | 555,290 | ||||
| After 5 years | 2,194 | 1,893 | 96,235 | 75,051 | ||||
| Total by maturity | $ | 12,642 | $ | 11,077 | $ | 828,691 | $ | 765,188 |
(1)The fair value amount receivable is composed of $4,697 million under protection purchased and $7,945 million under protection sold.
(2)The fair value amount payable is composed of $8,182 million under protection purchased and $2,895 million under protection sold.
| Fair values | Notionals | |||||||
|---|---|---|---|---|---|---|---|---|
| In millions of dollars at December 31, 2022 | Receivable(1) | Payable(2) | Protection<br>purchased | Protection<br>sold | ||||
| By instrument | ||||||||
| Credit default swaps and options | $ | 6,867 | $ | 7,360 | $ | 623,981 | $ | 586,504 |
| Total return swaps and other | 1,522 | 417 | 17,658 | 6,632 | ||||
| Total by instrument | $ | 8,389 | $ | 7,777 | $ | 641,639 | $ | 593,136 |
| By rating of reference entity | ||||||||
| Investment grade | $ | 3,796 | $ | 2,970 | $ | 499,339 | $ | 462,873 |
| Non-investment grade | 4,593 | 4,807 | 142,300 | 130,263 | ||||
| Total by rating of reference entity | $ | 8,389 | $ | 7,777 | $ | 641,639 | $ | 593,136 |
| By maturity | ||||||||
| Within 1 year | $ | 1,753 | $ | 1,801 | $ | 147,031 | $ | 148,721 |
| From 1 to 5 years | 4,577 | 4,134 | 443,113 | 407,293 | ||||
| After 5 years | 2,059 | 1,842 | 51,495 | 37,122 | ||||
| Total by maturity | $ | 8,389 | $ | 7,777 | $ | 641,639 | $ | 593,136 |
(1) The fair value amount receivable is composed of $5,094 million under protection purchased and $3,295 million under protection sold.
(2) The fair value amount payable is composed of $3,573 million under protection purchased and $4,204 million under protection sold.
Credit Risk-Related Contingent Features in Derivatives
Certain derivative instruments contain provisions that require the Company to either post additional collateral or immediately settle any outstanding liability balances upon the occurrence of a specified event related to the credit risk of the Company. These events, which are defined by the existing derivative contracts, are primarily downgrades in the credit ratings of the Company and its affiliates.
The fair value (excluding CVA) of all derivative instruments with credit risk-related contingent features that were in a net liability position at September 30, 2023 and December 31, 2022 was $15 billion and $18 billion, respectively. The Company posted $13 billion and $15 billion as collateral for this exposure in the normal course of business as of September 30, 2023 and December 31, 2022, respectively.
A downgrade could trigger additional collateral or cash settlement requirements for the Company and certain affiliates. In the event that Citigroup and Citibank were downgraded a single notch by all three major rating agencies as of September 30, 2023, the Company could be required to post an additional $0.7 billion as either collateral or settlement of the derivative transactions. In addition, the Company could be required to segregate with third-party custodians collateral previously received from existing derivative counterparties in the amount of $4 million upon the single notch downgrade, resulting in aggregate cash obligations and collateral requirements of approximately $0.7 billion.
Derivatives Accompanied by Financial Asset Transfers
For transfers of financial assets accounted for as a sale by the Company, and for which the Company has retained substantially all of the economic exposure to the transferred asset through a total return swap executed with the same counterparty in contemplation of the initial sale (and still outstanding), the asset amounts derecognized and the gross cash proceeds received as of the date of derecognition were $2.2 billion and $1.4 billion as of September 30, 2023 and December 31, 2022, respectively.
At September 30, 2023, the fair value of these previously derecognized assets was $2.2 billion. The fair value of the total return swaps as of September 30, 2023 was $3 million recorded as gross derivative assets and $52 million recorded as gross derivative liabilities. At December 31, 2022, the fair value of these previously derecognized assets was $1.4 billion, and the fair value of the total return swaps was $27 million recorded as gross derivative assets and $32 million recorded as gross derivative liabilities.
The balances for the total return swaps are on a gross basis, before the application of counterparty and cash collateral netting, and are included primarily as equity derivatives in the tabular disclosures in this Note.
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22. FAIR VALUE MEASUREMENT
For additional information regarding fair value measurement at Citi, see Note 25 to the Consolidated Financial Statements in Citi’s 2022 Form 10-K.
Fair Value Hierarchy
ASC 820-10 specifies a hierarchy of inputs based on whether the inputs are observable or unobservable. Observable inputs are developed using market data and reflect market participant assumptions, while unobservable inputs reflect the Company’s market assumptions. These two types of inputs have created the following fair value hierarchy:
•Level 1: Quoted prices for identical instruments in active markets.
•Level 2: Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-derived valuations in which all significant inputs and significant value drivers are observable in the market.
•Level 3: Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
As required under the fair value hierarchy, the Company considers relevant and observable market inputs in its valuations where possible.
The fair value hierarchy classification approach typically utilizes rules-based and data-driven selection criteria to determine whether an instrument is classified as Level 1, Level 2 or Level 3:
•The determination of whether an instrument is quoted in an active market and therefore considered a Level 1 instrument is based upon the frequency of observed transactions and the quality of independent market data available on the measurement date.
•A Level 2 classification is assigned where there is observability of prices/market inputs to models, or where any unobservable inputs are not significant to the valuation. The determination of whether an input is considered observable is based on the availability of independent market data and its corroboration, for example through observed transactions in the market.
•Otherwise, an instrument is classified as Level 3.
Market Valuation Adjustments
The table below summarizes the credit valuation adjustments (CVA) and funding valuation adjustments (FVA) applied to the fair value of derivative instruments at September 30, 2023 and December 31, 2022:
| Credit and funding <br>valuation adjustments<br>contra-liability (contra-asset) | ||||
|---|---|---|---|---|
| In millions of dollars | September 30,<br>2023 | December 31,<br>2022 | ||
| Counterparty CVA | $ | (589) | $ | (816) |
| Asset FVA | (539) | (622) | ||
| Citigroup (own credit) CVA | 473 | 607 | ||
| Liability FVA | 273 | 263 | ||
| Total CVA and FVA—derivative instruments | $ | (382) | $ | (568) |
The table below summarizes pretax gains (losses) related to changes in CVA on derivative instruments, net of hedges, FVA on derivatives and debt valuation adjustments (DVA) on Citi’s own fair value option (FVO) liabilities for the periods indicated:
| Credit/funding/debt valuation<br>adjustments gain (loss) | ||||||||
|---|---|---|---|---|---|---|---|---|
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||
| In millions of dollars | 2023 | 2022 | 2023 | 2022 | ||||
| Counterparty CVA | $ | 35 | $ | (10) | $ | 5 | $ | (211) |
| Asset FVA | (17) | (96) | 77 | (247) | ||||
| Own credit CVA | 14 | 29 | (134) | 327 | ||||
| Liability FVA | 38 | 58 | (5) | 148 | ||||
| Total CVA and FVA—derivative instruments | $ | 70 | $ | (19) | $ | (57) | $ | 17 |
| DVA related to own FVO liabilities(1) | $ | 395 | $ | 1,159 | $ | (875) | $ | 4,800 |
| Total CVA, DVA and FVA | $ | 465 | $ | 1,140 | $ | (932) | $ | 4,817 |
(1) See Note 20 to the Consolidated Financial Statements in Citi’s 2022 Form 10-K.
Items Measured at Fair Value on a Recurring Basis
The following tables present for each of the fair value hierarchy levels the Company’s assets and liabilities that are measured at fair value on a recurring basis at September 30, 2023 and December 31, 2022. The Company may hedge
positions that have been classified in the Level 3 category with other financial instruments (hedging instruments) that may be classified as Level 3, but also with financial instruments classified as Level 1 or Level 2. The effects of these hedges are presented gross in the following tables:
Fair Value Levels
| In millions of dollars at September 30, 2023 | Level 1 | Level 2 | Level 3 | Gross<br>inventory | Netting(1) | Net<br>balance | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Assets | ||||||||||||
| Securities borrowed and purchased under agreements to resell | $ | — | $ | 440,315 | $ | 135 | $ | 440,450 | $ | (234,299) | $ | 206,151 |
| Trading non-derivative assets | ||||||||||||
| Trading mortgage-backed securities | ||||||||||||
| U.S. government-sponsored agency guaranteed | — | 67,525 | 538 | 68,063 | — | 68,063 | ||||||
| Residential | 1 | 2,128 | 165 | 2,294 | — | 2,294 | ||||||
| Commercial | — | 505 | 205 | 710 | — | 710 | ||||||
| Total trading mortgage-backed securities | $ | 1 | $ | 70,158 | $ | 908 | $ | 71,067 | $ | — | $ | 71,067 |
| U.S. Treasury and federal agency securities | $ | 90,944 | $ | 1,717 | $ | — | $ | 92,661 | $ | — | $ | 92,661 |
| State and municipal | — | 1,903 | 3 | 1,906 | — | 1,906 | ||||||
| Foreign government | 45,369 | 31,687 | 69 | 77,125 | — | 77,125 | ||||||
| Corporate | 1,363 | 18,367 | 764 | 20,494 | — | 20,494 | ||||||
| Equity securities | 46,513 | 10,604 | 263 | 57,380 | — | 57,380 | ||||||
| Asset-backed securities | — | 1,805 | 575 | 2,380 | — | 2,380 | ||||||
| Other trading assets(2) | 64 | 13,764 | 973 | 14,801 | — | 14,801 | ||||||
| Total trading non-derivative assets | $ | 184,254 | $ | 150,005 | $ | 3,555 | $ | 337,814 | $ | — | $ | 337,814 |
| Trading derivatives | ||||||||||||
| Interest rate contracts | $ | 129 | $ | 176,243 | $ | 2,746 | $ | 179,118 | ||||
| Foreign exchange contracts | — | 172,886 | 1,431 | 174,317 | ||||||||
| Equity contracts | 25 | 41,817 | 1,211 | 43,053 | ||||||||
| Commodity contracts | — | 15,013 | 1,274 | 16,287 | ||||||||
| Credit derivatives | — | 11,803 | 839 | 12,642 | ||||||||
| Total trading derivatives—before netting and collateral | $ | 154 | $ | 417,762 | $ | 7,501 | $ | 425,417 | ||||
| Netting agreements | $ | (333,991) | ||||||||||
| Netting of cash collateral received | (22,872) | |||||||||||
| Total trading derivatives—after netting and collateral | $ | 154 | $ | 417,762 | $ | 7,501 | $ | 425,417 | $ | (356,863) | $ | 68,554 |
| Investments | ||||||||||||
| Mortgage-backed securities | ||||||||||||
| U.S. government-sponsored agency guaranteed | $ | — | $ | 19,786 | $ | 29 | $ | 19,815 | $ | — | $ | 19,815 |
| Residential | — | 283 | 24 | 307 | — | 307 | ||||||
| Commercial | — | 1 | — | 1 | — | 1 | ||||||
| Total investment mortgage-backed securities | $ | — | $ | 20,070 | $ | 53 | $ | 20,123 | $ | — | $ | 20,123 |
| U.S. Treasury and federal agency securities | $ | 80,949 | $ | 299 | $ | 20 | $ | 81,268 | $ | — | $ | 81,268 |
| State and municipal | — | 1,538 | 493 | 2,031 | — | 2,031 | ||||||
| Foreign government | 57,970 | 67,230 | 196 | 125,396 | — | 125,396 | ||||||
| Corporate | 2,835 | 2,269 | 289 | 5,393 | — | 5,393 | ||||||
| Marketable equity securities | 186 | 86 | 11 | 283 | — | 283 | ||||||
| Asset-backed securities | — | 652 | 30 | 682 | — | 682 | ||||||
| Other debt securities | — | 6,890 | — | 6,890 | — | 6,890 | ||||||
| Non-marketable equity securities(3) | — | — | 431 | 431 | — | 431 | ||||||
| Total investments | $ | 141,940 | $ | 99,034 | $ | 1,523 | $ | 242,497 | $ | — | $ | 242,497 |
Table continues on the next page.
| In millions of dollars at September 30, 2023 | Level 1 | Level 2 | Level 3 | Gross<br>inventory | Netting(1) | Net<br>balance | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Loans | $ | — | $ | 7,146 | $ | 265 | $ | 7,411 | $ | — | $ | 7,411 | |||
| Mortgage servicing rights | — | — | 729 | 729 | — | 729 | |||||||||
| Non-trading derivatives and other financial assets measured on a recurring basis | $ | 6,990 | $ | 7,496 | $ | 77 | $ | 14,563 | $ | — | $ | 14,563 | |||
| Total assets | $ | 333,338 | $ | 1,121,758 | $ | 13,785 | $ | 1,468,881 | $ | (591,162) | $ | 877,719 | |||
| Total as a percentage of gross assets(4) | 22.7% | 76.4% | 0.9% | ||||||||||||
| Liabilities | |||||||||||||||
| Interest-bearing deposits | $ | — | $ | 2,567 | $ | 155 | $ | 2,722 | $ | — | $ | 2,722 | |||
| Securities loaned and sold under agreements to repurchase | — | 225,705 | 481 | 226,186 | (165,524) | 60,662 | |||||||||
| Trading account liabilities | |||||||||||||||
| Securities sold, not yet purchased | 96,351 | 13,412 | 88 | 109,851 | — | 109,851 | |||||||||
| Other trading liabilities | — | 11 | 1 | 12 | — | 12 | |||||||||
| Total trading account liabilities | $ | 96,351 | $ | 13,423 | $ | 89 | $ | 109,863 | $ | — | $ | 109,863 | |||
| Trading derivatives | |||||||||||||||
| Interest rate contracts | $ | 120 | $ | 168,590 | $ | 4,549 | $ | 173,259 | |||||||
| Foreign exchange contracts | — | 166,133 | 818 | 166,951 | |||||||||||
| Equity contracts | 35 | 44,118 | 2,346 | 46,499 | |||||||||||
| Commodity contracts | — | 16,035 | 1,225 | 17,260 | |||||||||||
| Credit derivatives | — | 10,311 | 766 | 11,077 | |||||||||||
| Total trading derivatives—before netting and collateral | $ | 155 | $ | 405,187 | $ | 9,704 | $ | 415,046 | |||||||
| Netting agreements | $ | (333,991) | |||||||||||||
| Netting of cash collateral paid | (26,294) | ||||||||||||||
| Total trading derivatives—after netting and collateral | $ | 155 | $ | 405,187 | $ | 9,704 | $ | 415,046 | $ | (360,285) | $ | 54,761 | |||
| Short-term borrowings | $ | — | $ | 6,014 | $ | 456 | $ | 6,470 | $ | — | $ | 6,470 | |||
| Long-term debt | — | 76,979 | 35,650 | 112,629 | — | 112,629 | |||||||||
| Total non-trading derivatives and other financial liabilities measured on a recurring basis | $ | 7,111 | $ | 177 | $ | 28 | $ | 7,316 | $ | — | $ | 7,316 | |||
| Total liabilities | $ | 103,617 | $ | 730,052 | $ | 46,563 | $ | 880,232 | $ | (525,809) | $ | 354,423 | |||
| Total as a percentage of gross liabilities(4) | 11.8 | % | 82.9 | % | 5.3 | % |
(1)Represents netting of (i) the amounts due under securities purchased under agreements to resell and the amounts owed under securities sold under agreements to repurchase and (ii) derivative exposures covered by a qualifying master netting agreement and cash collateral offsetting.
(2)Includes positions related to investments in unallocated precious metals, as discussed in Note 23. Also includes physical commodities accounted for at the lower of cost or fair value and unfunded credit products.
(3)Amounts exclude $24 million of investments measured at net asset value (NAV) in accordance with ASU 2015-07, Fair Value Measurement (Topic 820): Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent).
(4)Because the amount of the cash collateral paid/received has not been allocated to the Level 1, 2 and 3 subtotals, these percentages are calculated based on total assets and liabilities measured at fair value on a recurring basis, excluding the cash collateral paid/received on derivatives.
Fair Value Levels
| In millions of dollars at December 31, 2022 | Level 1 | Level 2 | Level 3 | Gross<br>inventory | Netting(1) | Net<br>balance | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Assets | ||||||||||||
| Securities borrowed and purchased under agreements to resell | $ | — | $ | 350,145 | $ | 149 | $ | 350,294 | $ | (110,767) | $ | 239,527 |
| Trading non-derivative assets | ||||||||||||
| Trading mortgage-backed securities | ||||||||||||
| U.S. government-sponsored agency guaranteed | — | 34,878 | 600 | 35,478 | — | 35,478 | ||||||
| Residential | 1 | 1,821 | 166 | 1,988 | — | 1,988 | ||||||
| Commercial | — | 798 | 145 | 943 | — | 943 | ||||||
| Total trading mortgage-backed securities | $ | 1 | $ | 37,497 | $ | 911 | $ | 38,409 | $ | — | $ | 38,409 |
| U.S. Treasury and federal agency securities | $ | 63,067 | $ | 4,513 | $ | 1 | $ | 67,581 | $ | — | $ | 67,581 |
| State and municipal | — | 2,256 | 7 | 2,263 | — | 2,263 | ||||||
| Foreign government | 38,383 | 25,850 | 119 | 64,352 | — | 64,352 | ||||||
| Corporate | 1,593 | 11,955 | 394 | 13,942 | — | 13,942 | ||||||
| Equity securities | 43,990 | 10,179 | 192 | 54,361 | — | 54,361 | ||||||
| Asset-backed securities | — | 1,597 | 668 | 2,265 | — | 2,265 | ||||||
| Other trading assets(2) | 24 | 14,963 | 648 | 15,635 | — | 15,635 | ||||||
| Total trading non-derivative assets | $ | 147,058 | $ | 108,810 | $ | 2,940 | $ | 258,808 | $ | — | $ | 258,808 |
| Trading derivatives | ||||||||||||
| Interest rate contracts | $ | 297 | $ | 174,156 | $ | 3,751 | $ | 178,204 | ||||
| Foreign exchange contracts | — | 186,897 | 766 | 187,663 | ||||||||
| Equity contracts | 20 | 40,683 | 1,704 | 42,407 | ||||||||
| Commodity contracts | — | 26,823 | 1,501 | 28,324 | ||||||||
| Credit derivatives | — | 7,484 | 905 | 8,389 | ||||||||
| Total trading derivatives—before netting and collateral | $ | 317 | $ | 436,043 | $ | 8,627 | $ | 444,987 | ||||
| Netting agreements | $ | (346,545) | ||||||||||
| Netting of cash collateral received(3) | (23,136) | |||||||||||
| Total trading derivatives—after netting and collateral | $ | 317 | $ | 436,043 | $ | 8,627 | $ | 444,987 | $ | (369,681) | $ | 75,306 |
| Investments | ||||||||||||
| Mortgage-backed securities | ||||||||||||
| U.S. government-sponsored agency guaranteed | $ | — | $ | 11,232 | $ | 30 | $ | 11,262 | $ | — | $ | 11,262 |
| Residential | — | 444 | 41 | 485 | — | 485 | ||||||
| Commercial | — | 2 | — | 2 | — | 2 | ||||||
| Total investment mortgage-backed securities | $ | — | $ | 11,678 | $ | 71 | $ | 11,749 | $ | — | $ | 11,749 |
| U.S. Treasury and federal agency securities | $ | 91,851 | $ | 439 | $ | — | $ | 92,290 | $ | — | $ | 92,290 |
| State and municipal | — | 1,637 | 586 | 2,223 | — | 2,223 | ||||||
| Foreign government | 58,419 | 74,250 | 608 | 133,277 | — | 133,277 | ||||||
| Corporate | 2,230 | 2,343 | 343 | 4,916 | — | 4,916 | ||||||
| Marketable equity securities | 254 | 165 | 10 | 429 | — | 429 | ||||||
| Asset-backed securities | — | 1,029 | 1 | 1,030 | — | 1,030 | ||||||
| Other debt securities | — | 4,194 | — | 4,194 | — | 4,194 | ||||||
| Non-marketable equity securities(4) | — | 9 | 430 | 439 | — | 439 | ||||||
| Total investments | $ | 152,754 | $ | 95,744 | $ | 2,049 | $ | 250,547 | $ | — | $ | 250,547 |
Table continues on the next page.
| In millions of dollars at December 31, 2022 | Level 1 | Level 2 | Level 3 | Gross<br>inventory | Netting(1) | Net<br>balance | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Loans | $ | — | $ | 3,999 | $ | 1,361 | $ | 5,360 | $ | — | $ | 5,360 | |||
| Mortgage servicing rights | — | — | 665 | 665 | — | 665 | |||||||||
| Non-trading derivatives and other financial assets measured on a recurring basis | $ | 4,310 | $ | 6,291 | $ | 57 | $ | 10,658 | $ | — | $ | 10,658 | |||
| Total assets | $ | 304,439 | $ | 1,001,032 | $ | 15,848 | $ | 1,321,319 | $ | (480,448) | $ | 840,871 | |||
| Total as a percentage of gross assets(5) | 23.0% | 75.8% | 1.2% | ||||||||||||
| Liabilities | |||||||||||||||
| Interest-bearing deposits | $ | — | $ | 1,860 | $ | 15 | $ | 1,875 | $ | — | $ | 1,875 | |||
| Securities loaned and sold under agreements to repurchase | — | 155,822 | 1,031 | 156,853 | (85,967) | 70,886 | |||||||||
| Trading account liabilities | |||||||||||||||
| Securities sold, not yet purchased | 97,559 | 13,111 | 50 | 110,720 | — | 110,720 | |||||||||
| Other trading liabilities | — | 8 | 3 | 11 | — | 11 | |||||||||
| Total trading account liabilities | $ | 97,559 | $ | 13,119 | $ | 53 | $ | 110,731 | $ | — | $ | 110,731 | |||
| Trading derivatives | |||||||||||||||
| Interest rate contracts | $ | 175 | $ | 169,049 | $ | 3,396 | $ | 172,620 | |||||||
| Foreign exchange contracts | — | 185,279 | 716 | 185,995 | |||||||||||
| Equity contracts | 70 | 40,905 | 2,808 | 43,783 | |||||||||||
| Commodity contracts | 2 | 25,093 | 1,223 | 26,318 | |||||||||||
| Credit derivatives | — | 6,715 | 1,062 | 7,777 | |||||||||||
| Total trading derivatives—before netting and collateral | $ | 247 | $ | 427,041 | $ | 9,205 | $ | 436,493 | |||||||
| Netting agreements | $ | (346,545) | |||||||||||||
| Netting of cash collateral paid(3) | (30,032) | ||||||||||||||
| Total trading derivatives—after netting and collateral | $ | 247 | $ | 427,041 | $ | 9,205 | $ | 436,493 | $ | (376,577) | $ | 59,916 | |||
| Short-term borrowings | $ | — | $ | 6,184 | $ | 38 | $ | 6,222 | $ | — | $ | 6,222 | |||
| Long-term debt | — | 69,878 | 36,117 | 105,995 | — | 105,995 | |||||||||
| Total non-trading derivatives and other financial liabilities measured on a recurring basis | $ | 4,197 | $ | 240 | $ | 2 | $ | 4,439 | $ | — | $ | 4,439 | |||
| Total liabilities | $ | 102,003 | $ | 674,144 | $ | 46,461 | $ | 822,608 | $ | (462,544) | $ | 360,064 | |||
| Total as a percentage of gross liabilities(5) | 12.4 | % | 82.0 | % | 5.6 | % |
(1)Represents netting of (i) the amounts due under securities purchased under agreements to resell and the amounts owed under securities sold under agreements to repurchase and (ii) derivative exposures covered by a qualifying master netting agreement and cash collateral offsetting.
(2)Includes positions related to investments in unallocated precious metals, as discussed in Note 23. Also includes physical commodities accounted for at the lower of cost or fair value and unfunded credit products.
(3)Represents the netting of cash collateral paid and received by counterparties under enforceable credit support agreements. Substantially all netting of cash collateral received and paid is against OTC derivative assets and liabilities, respectively.
(4)Amounts exclude $27 million of investments measured at NAV in accordance with ASU 2015-07, Fair Value Measurement (Topic 820): Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent).
(5)Because the amount of the cash collateral paid/received has not been allocated to the Level 1, 2 and 3 subtotals, these percentages are calculated based on total assets and liabilities measured at fair value on a recurring basis, excluding the cash collateral paid/received on derivatives.
Changes in Level 3 Fair Value Category
The following tables present the changes in the Level 3 fair value category for the three and nine months ended September 30, 2023 and 2022. The gains and losses presented below include changes in the fair value related to both observable and unobservable inputs.
The Company often hedges positions with offsetting positions that are classified in a different level. For example,
the gains and losses for assets and liabilities in the Level 3 category presented in the tables below do not reflect the effect of offsetting losses and gains on hedging instruments that may be classified in the Level 1 or Level 2 categories. In addition, the Company hedges items classified in the Level 3 category with instruments also classified in Level 3 of the fair value hierarchy. The hedged items and related hedges are presented gross in the following tables:
Level 3 Fair Value Rollforward
| Net realized/unrealized<br><br>gains (losses) incl. in(1) | Transfers | Unrealized<br>gains (losses)<br>still held(3) | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| In millions of dollars | Jun. 30, 2023 | Principal<br>transactions | Other(1)(2) | into<br>Level 3 | out of<br>Level 3 | Purchases | Issuances | Sales | Settlements | Sept. 30, 2023 | ||||||||||||
| Assets | ||||||||||||||||||||||
| Securities borrowed and purchased under agreements to resell | $ | 140 | $ | 1 | $ | — | $ | — | $ | — | $ | 126 | $ | — | $ | — | $ | (132) | $ | 135 | $ | 9 |
| Trading non-derivative assets | ||||||||||||||||||||||
| Trading mortgage-backed securities | ||||||||||||||||||||||
| U.S. government-sponsored agency guaranteed | 659 | (21) | — | 93 | (155) | 92 | — | (130) | — | 538 | (14) | |||||||||||
| Residential | 145 | (1) | — | 31 | (3) | 52 | — | (59) | — | 165 | (3) | |||||||||||
| Commercial | 182 | (8) | — | 59 | (25) | 26 | — | (29) | — | 205 | (8) | |||||||||||
| Total trading mortgage-backed securities | $ | 986 | $ | (30) | $ | — | $ | 183 | $ | (183) | $ | 170 | $ | — | $ | (218) | $ | — | $ | 908 | $ | (25) |
| U.S. Treasury and federal agency securities | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — |
| State and municipal | 3 | — | — | — | — | — | — | — | — | 3 | — | |||||||||||
| Foreign government | 81 | (23) | — | — | (31) | 70 | — | (28) | — | 69 | 19 | |||||||||||
| Corporate | 581 | 224 | — | 38 | (303) | 624 | — | (400) | — | 764 | (232) | |||||||||||
| Marketable equity securities | 285 | 2 | — | 16 | (10) | 28 | — | (58) | — | 263 | 1 | |||||||||||
| Asset-backed securities | 539 | 6 | — | 15 | (39) | 297 | — | (243) | — | 575 | 2 | |||||||||||
| Other trading assets | 1,478 | (332) | — | 279 | (198) | 260 | — | (514) | — | 973 | (114) | |||||||||||
| Total trading non-derivative assets | $ | 3,953 | $ | (153) | $ | — | $ | 531 | $ | (764) | $ | 1,449 | $ | — | $ | (1,461) | $ | — | $ | 3,555 | $ | (349) |
| Trading derivatives, net(4) | ||||||||||||||||||||||
| Interest rate contracts | $ | (1,962) | $ | (474) | $ | — | $ | (18) | $ | 298 | $ | 51 | $ | — | $ | 49 | $ | 253 | $ | (1,803) | $ | (637) |
| Foreign exchange contracts | 700 | 158 | — | 1 | (24) | 50 | — | (8) | (264) | 613 | 159 | |||||||||||
| Equity contracts | (1,563) | 641 | — | 128 | (145) | (346) | — | (21) | 171 | (1,135) | 212 | |||||||||||
| Commodity contracts | 330 | 222 | — | 96 | (149) | (389) | — | (2) | (59) | 49 | 120 | |||||||||||
| Credit derivatives | (155) | 54 | — | 22 | 81 | 80 | — | — | (9) | 73 | (16) | |||||||||||
| Total trading derivatives, net(4) | $ | (2,650) | $ | 601 | $ | — | $ | 229 | $ | 61 | $ | (554) | $ | — | $ | 18 | $ | 92 | $ | (2,203) | $ | (162) |
Table continues on the next page.
| Net realized/unrealized<br><br>gains (losses) incl. in(1) | Transfers | Unrealized<br>gains (losses)<br>still held(3) | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| In millions of dollars | Jun. 30, 2023 | Principal<br>transactions | Other(1)(2) | into<br>Level 3 | out of<br>Level 3 | Purchases | Issuances | Sales | Settlements | Sept. 30, 2023 | ||||||||||||
| Investments | ||||||||||||||||||||||
| Mortgage-backed securities | ||||||||||||||||||||||
| U.S. government-sponsored agency guaranteed | $ | 32 | $ | — | $ | — | $ | — | $ | (3) | $ | — | $ | — | $ | — | $ | — | $ | 29 | $ | — |
| Residential | 25 | — | (1) | — | — | — | — | — | — | 24 | (1) | |||||||||||
| Commercial | — | — | — | — | — | — | — | — | — | — | — | |||||||||||
| Total investment mortgage-backed securities | $ | 57 | $ | — | $ | (1) | $ | — | $ | (3) | $ | — | $ | — | $ | — | $ | — | $ | 53 | $ | (1) |
| U.S. Treasury and federal agency securities | $ | 21 | $ | — | $ | (1) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 20 | $ | — |
| State and municipal | 507 | — | (29) | 1 | — | 45 | — | (31) | — | 493 | (29) | |||||||||||
| Foreign government | 414 | — | (12) | 2 | (179) | 124 | — | (153) | — | 196 | 1 | |||||||||||
| Corporate | 290 | — | — | — | — | 15 | — | (16) | — | 289 | — | |||||||||||
| Marketable equity securities | 13 | — | (2) | — | — | — | — | — | — | 11 | — | |||||||||||
| Asset-backed securities | 1 | — | (1) | 30 | — | — | — | — | — | 30 | — | |||||||||||
| Other debt securities | 57 | — | 1 | — | (58) | — | — | — | — | — | — | |||||||||||
| Non-marketable equity securities | 404 | — | 21 | 6 | — | — | — | — | — | 431 | (5) | |||||||||||
| Total investments | $ | 1,764 | $ | — | $ | (24) | $ | 39 | $ | (240) | $ | 184 | $ | — | $ | (200) | $ | — | $ | 1,523 | $ | (34) |
| Loans | $ | 241 | $ | — | $ | 15 | $ | — | $ | — | $ | — | $ | 10 | $ | — | $ | (1) | $ | 265 | $ | (82) |
| Mortgage servicing rights | 681 | — | 42 | — | — | — | 23 | — | (17) | 729 | 41 | |||||||||||
| Other financial assets measured at fair value on a recurring basis | 73 | — | (22) | — | — | 28 | — | (2) | — | 77 | — | |||||||||||
| Liabilities | ||||||||||||||||||||||
| Interest-bearing deposits | $ | 26 | $ | — | $ | (10) | $ | 49 | $ | — | $ | — | $ | 70 | $ | — | $ | — | $ | 155 | $ | (11) |
| Securities loaned and sold under agreements to repurchase | 627 | (2) | — | — | — | — | — | — | (148) | 481 | 1 | |||||||||||
| Trading account liabilities | ||||||||||||||||||||||
| Securities sold, not yet purchased | 62 | — | — | 11 | (3) | 61 | — | — | (43) | 88 | (2) | |||||||||||
| Other trading liabilities | 4 | — | — | 1 | (2) | 2 | — | — | (4) | 1 | — | |||||||||||
| Short-term borrowings | 296 | — | — | 16 | (7) | 1 | 181 | — | (31) | 456 | (21) | |||||||||||
| Long-term debt | 37,204 | 2,816 | — | 1,010 | (1,336) | — | 3,027 | — | (1,439) | 35,650 | 2,112 | |||||||||||
| Other financial liabilities measured on a recurring basis | 23 | — | — | — | — | — | 26 | (21) | — | 28 | — |
(1)Net realized/unrealized gains (losses) are presented as increase (decrease) to Level 3 assets, and as (increase) decrease to Level 3 liabilities. Changes in fair value of available-for-sale debt securities are recorded in AOCI, unless related to credit impairment, while gains and losses from sales are recorded in Realized gains (losses) from sales of investments in the Consolidated Statement of Income.
(2)Unrealized gains (losses) on MSRs are recorded in Other revenue in the Consolidated Statement of Income.
(3)Represents the amount of total gains or losses for the period, included in earnings (and AOCI for changes in fair value of available-for-sale debt securities and DVA on fair value option liabilities), attributable to the change in fair value relating to assets and liabilities classified as Level 3 that are still held at September 30, 2023.
(4)Total Level 3 derivative assets and liabilities have been netted in these tables for presentation purposes only.
| Net realized/unrealized<br><br>gains (losses) incl. in(1) | Transfers | Unrealized<br>gains (losses)<br>still held(3) | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| In millions of dollars | Dec. 31, 2022 | Principal<br>transactions | Other(1)(2) | into<br>Level 3 | out of<br>Level 3 | Purchases | Issuances | Sales | Settlements | Sept. 30, 2023 | ||||||||||||
| Assets | ||||||||||||||||||||||
| Securities borrowed and purchased under agreements to resell | $ | 149 | $ | 4 | $ | — | $ | — | $ | (2) | $ | 263 | $ | — | $ | — | $ | (279) | $ | 135 | $ | 9 |
| Trading non-derivative assets | ||||||||||||||||||||||
| Trading mortgage-backed securities | ||||||||||||||||||||||
| U.S. government-sponsored agency guaranteed | 600 | (31) | — | 278 | (421) | 462 | — | (350) | — | 538 | (34) | |||||||||||
| Residential | 166 | (2) | — | 92 | (65) | 152 | — | (178) | — | 165 | (17) | |||||||||||
| Commercial | 145 | (23) | — | 163 | (56) | 76 | — | (100) | — | 205 | (19) | |||||||||||
| Total trading mortgage-backed securities | $ | 911 | $ | (56) | $ | — | $ | 533 | $ | (542) | $ | 690 | $ | — | $ | (628) | $ | — | $ | 908 | $ | (70) |
| U.S. Treasury and federal agency securities | $ | 1 | $ | (1) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — |
| State and municipal | 7 | (3) | — | 19 | — | — | — | (20) | — | 3 | (1) | |||||||||||
| Foreign government | 119 | (17) | — | 8 | (58) | 131 | — | (114) | — | 69 | 22 | |||||||||||
| Corporate | 394 | 300 | — | 248 | (481) | 976 | — | (673) | — | 764 | (185) | |||||||||||
| Marketable equity securities | 192 | 11 | — | 42 | (18) | 125 | — | (89) | — | 263 | 10 | |||||||||||
| Asset-backed securities | 668 | 20 | — | 94 | (120) | 615 | — | (702) | — | 575 | 4 | |||||||||||
| Other trading assets | 648 | 69 | — | 540 | (274) | 728 | — | (738) | — | 973 | (123) | |||||||||||
| Total trading non-derivative assets | $ | 2,940 | $ | 323 | $ | — | $ | 1,484 | $ | (1,493) | $ | 3,265 | $ | — | $ | (2,964) | $ | — | $ | 3,555 | $ | (343) |
| Trading derivatives, net(4) | ||||||||||||||||||||||
| Interest rate contracts | $ | 355 | $ | (2,163) | $ | — | $ | (220) | $ | (361) | $ | 38 | $ | — | $ | 62 | $ | 486 | $ | (1,803) | $ | (2,060) |
| Foreign exchange contracts | 50 | 704 | — | 105 | 24 | 152 | — | (89) | (333) | 613 | 408 | |||||||||||
| Equity contracts | (1,104) | (237) | — | 61 | 661 | (599) | — | (65) | 148 | (1,135) | (596) | |||||||||||
| Commodity contracts | 278 | 85 | — | 270 | 91 | (447) | — | (14) | (214) | 49 | 12 | |||||||||||
| Credit derivatives | (157) | (92) | — | 19 | 217 | 82 | — | — | 4 | 73 | (84) | |||||||||||
| Total trading derivatives, net(4) | $ | (578) | $ | (1,703) | $ | — | $ | 235 | $ | 632 | $ | (774) | $ | — | $ | (106) | $ | 91 | $ | (2,203) | $ | (2,320) |
Table continues on the next page.
| Net realized/unrealized<br><br>gains (losses) incl. in(1) | Transfers | Unrealized<br>gains (losses)<br>still held(3) | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| In millions of dollars | Dec. 31, 2022 | Principal<br>transactions | Other(1)(2) | into<br>Level 3 | out of<br>Level 3 | Purchases | Issuances | Sales | Settlements | Sept. 30, 2023 | ||||||||||||
| Investments | ||||||||||||||||||||||
| Mortgage-backed securities | ||||||||||||||||||||||
| U.S. government-sponsored agency guaranteed | $ | 30 | $ | — | $ | (1) | $ | — | $ | (3) | $ | 4 | $ | — | $ | (1) | $ | — | $ | 29 | $ | (3) |
| Residential | 41 | — | (1) | — | — | — | — | (16) | — | 24 | (1) | |||||||||||
| Commercial | — | — | — | — | — | — | — | — | — | — | — | |||||||||||
| Total investment mortgage-backed securities | $ | 71 | $ | — | $ | (2) | $ | — | $ | (3) | $ | 4 | $ | — | $ | (17) | $ | — | $ | 53 | $ | (4) |
| U.S. Treasury and federal agency securities | $ | — | $ | — | $ | (1) | $ | — | $ | — | $ | 51 | $ | — | $ | (30) | $ | — | $ | 20 | $ | — |
| State and municipal | 586 | — | (20) | 2 | (77) | 46 | — | (44) | — | 493 | (23) | |||||||||||
| Foreign government | 608 | — | (7) | 27 | (197) | 647 | — | (882) | — | 196 | 1 | |||||||||||
| Corporate | 343 | — | (1) | — | (61) | 96 | — | (88) | — | 289 | (4) | |||||||||||
| Marketable equity securities | 10 | — | 1 | — | — | — | — | — | — | 11 | — | |||||||||||
| Asset-backed securities | 1 | — | (1) | 30 | — | — | — | — | — | 30 | — | |||||||||||
| Other debt securities | — | — | 1 | — | (63) | 62 | — | — | — | — | — | |||||||||||
| Non-marketable equity securities | 430 | — | 3 | 8 | — | 16 | — | (26) | — | 431 | (5) | |||||||||||
| Total investments | $ | 2,049 | $ | — | $ | (27) | $ | 67 | $ | (401) | $ | 922 | $ | — | $ | (1,087) | $ | — | $ | 1,523 | $ | (35) |
| Loans | $ | 1,361 | $ | — | $ | (249) | $ | 2 | $ | (309) | $ | — | $ | 116 | $ | — | $ | (656) | $ | 265 | $ | (104) |
| Mortgage servicing rights | 665 | — | 61 | — | — | — | 54 | — | (51) | 729 | 62 | |||||||||||
| Other financial assets measured at fair value on a recurring basis | 57 | — | (24) | — | (2) | 50 | — | (4) | — | 77 | — | |||||||||||
| Liabilities | ||||||||||||||||||||||
| Interest-bearing deposits | $ | 15 | $ | (7) | $ | (12) | $ | 49 | $ | (1) | $ | — | $ | 83 | $ | — | $ | (10) | $ | 155 | $ | (11) |
| Securities loaned and sold under agreements to repurchase | 1,031 | (8) | — | — | (24) | 1,335 | — | — | (1,869) | 481 | 1 | |||||||||||
| Trading account liabilities | ||||||||||||||||||||||
| Securities sold, not yet purchased | 50 | (13) | — | 22 | (34) | 125 | — | — | (88) | 88 | (2) | |||||||||||
| Other trading liabilities | 3 | 2 | — | 4 | (2) | 2 | — | — | (4) | 1 | — | |||||||||||
| Short-term borrowings | 38 | 40 | — | 35 | (23) | 1 | 478 | — | (33) | 456 | (31) | |||||||||||
| Long-term debt | 36,117 | 2,589 | — | 4,238 | (7,442) | — | 7,371 | — | (2,045) | 35,650 | 841 | |||||||||||
| Other financial liabilities measured on a recurring basis | 2 | — | 1 | — | (1) | — | 49 | (21) | — | 28 | — |
(1)Net realized/unrealized gains (losses) are presented as increase (decrease) to Level 3 assets, and as (increase) decrease to Level 3 liabilities. Changes in fair value of available-for-sale debt securities are recorded in AOCI, unless related to credit impairment, while gains and losses from sales are recorded in Realized gains (losses) from sales of investments in the Consolidated Statement of Income.
(2)Unrealized gains (losses) on MSRs are recorded in Other revenue in the Consolidated Statement of Income.
(3)Represents the amount of total gains or losses for the period, included in earnings (and AOCI for changes in fair value of available-for-sale debt securities and DVA on fair value option liabilities), attributable to the change in fair value relating to assets and liabilities classified as Level 3 that are still held at September 30, 2023.
(4)Total Level 3 derivative assets and liabilities have been netted in these tables for presentation purposes only.
| Net realized/unrealized<br><br>gains (losses) incl. in(1) | Transfers | Unrealized<br>gains (losses)<br>still held(3) | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| In millions of dollars | Jun. 30, 2022 | Principal<br>transactions | Other(1)(2) | into<br>Level 3 | out of<br>Level 3 | Purchases | Issuances | Sales | Settlements | Sept. 30, 2022 | ||||||||||||
| Assets | ||||||||||||||||||||||
| Securities borrowed and purchased under agreements to resell | $ | 183 | $ | (1) | $ | — | $ | — | $ | — | $ | 128 | $ | — | $ | — | $ | (169) | $ | 141 | $ | 3 |
| Trading non-derivative assets | ||||||||||||||||||||||
| Trading mortgage-backed securities | ||||||||||||||||||||||
| U.S. government-sponsored agency guaranteed | 708 | (28) | — | 54 | (153) | 310 | — | (219) | — | 672 | (33) | |||||||||||
| Residential | 153 | (2) | — | 25 | (22) | 33 | — | (45) | — | 142 | (2) | |||||||||||
| Commercial | 138 | (4) | — | 20 | (17) | 5 | — | (26) | — | 116 | 1 | |||||||||||
| Total trading mortgage-backed securities | $ | 999 | $ | (34) | $ | — | $ | 99 | $ | (192) | $ | 348 | $ | — | $ | (290) | $ | — | $ | 930 | $ | (34) |
| U.S. Treasury and federal agency securities | $ | 1 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | (1) | $ | — | $ | — |
| State and municipal | 80 | 4 | — | 4 | (6) | 14 | — | (74) | — | 22 | — | |||||||||||
| Foreign government | 364 | (14) | — | 5 | (4) | 70 | — | (41) | — | 380 | (9) | |||||||||||
| Corporate | 537 | 21 | — | 193 | (72) | 91 | — | (310) | — | 460 | (15) | |||||||||||
| Marketable equity securities | 133 | 48 | — | 71 | (12) | 34 | — | (87) | — | 187 | (26) | |||||||||||
| Asset-backed securities | 554 | (7) | — | 68 | (25) | 196 | — | (174) | — | 612 | (18) | |||||||||||
| Other trading assets | 816 | 32 | — | 74 | (280) | 191 | 11 | (161) | (4) | 679 | (19) | |||||||||||
| Total trading non-derivative assets | $ | 3,484 | $ | 50 | $ | — | $ | 514 | $ | (591) | $ | 944 | $ | 11 | $ | (1,137) | $ | (5) | $ | 3,270 | $ | (121) |
| Trading derivatives, net(4) | ||||||||||||||||||||||
| Interest rate contracts | $ | 881 | $ | (278) | $ | — | $ | (503) | $ | (12) | $ | (195) | $ | 1 | $ | 83 | $ | (3) | $ | (26) | $ | (142) |
| Foreign exchange contracts | 156 | (171) | — | 32 | (3) | (146) | — | 212 | 197 | 277 | 121 | |||||||||||
| Equity contracts | (101) | 162 | — | 60 | 222 | (347) | — | 28 | 37 | 61 | (150) | |||||||||||
| Commodity contracts | 255 | 110 | — | 140 | (134) | (60) | — | (2) | (56) | 253 | 151 | |||||||||||
| Credit derivatives | (349) | (110) | — | 53 | 124 | (36) | — | 1 | 204 | (113) | (164) | |||||||||||
| Total trading derivatives, net(4) | $ | 842 | $ | (287) | $ | — | $ | (218) | $ | 197 | $ | (784) | $ | 1 | $ | 322 | $ | 379 | $ | 452 | $ | (184) |
Table continues on the next page.
| Net realized/unrealized<br><br>gains (losses) incl. in(1) | Transfers | Unrealized<br>gains (losses)<br>still held(3) | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| In millions of dollars | Jun. 30, 2022 | Principal<br>transactions | Other(1)(2) | into<br>Level 3 | out of<br>Level 3 | Purchases | Issuances | Sales | Settlements | Sept. 30, 2022 | ||||||||||||
| Investments | ||||||||||||||||||||||
| Mortgage-backed securities | ||||||||||||||||||||||
| U.S. government-sponsored agency guaranteed | $ | 28 | $ | — | $ | (2) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 26 | $ | (2) |
| Residential | 40 | — | (4) | — | — | 3 | — | — | — | 39 | (5) | |||||||||||
| Total investment mortgage-backed securities | $ | 68 | $ | — | $ | (6) | $ | — | $ | — | $ | 3 | $ | — | $ | — | $ | — | $ | 65 | $ | (7) |
| U.S. Treasury and federal agency securities | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — |
| State and municipal | 539 | — | (20) | 81 | — | — | — | (25) | — | 575 | (14) | |||||||||||
| Foreign government | 1,001 | — | (53) | 6 | (56) | 224 | — | (262) | — | 860 | (44) | |||||||||||
| Corporate | 334 | — | 4 | 1 | (3) | 1 | — | — | — | 337 | — | |||||||||||
| Marketable equity securities | 10 | — | — | — | — | — | — | — | — | 10 | — | |||||||||||
| Asset-backed securities | 1 | — | 8 | — | — | — | — | (7) | — | 2 | — | |||||||||||
| Non-marketable equity securities | 310 | — | (3) | — | (10) | 87 | — | — | — | 384 | — | |||||||||||
| Total investments | $ | 2,263 | $ | — | $ | (70) | $ | 88 | $ | (69) | $ | 315 | $ | — | $ | (294) | $ | — | $ | 2,233 | $ | (65) |
| Loans | $ | 325 | $ | — | $ | 5 | $ | 83 | $ | (3) | $ | — | $ | 333 | $ | — | $ | (108) | $ | 635 | $ | (6) |
| Mortgage servicing rights | 600 | — | 37 | — | — | — | 25 | — | (15) | 647 | 38 | |||||||||||
| Other financial assets measured at fair value on a recurring basis | 63 | — | (19) | 22 | — | 7 | (1) | (16) | (6) | 50 | (12) | |||||||||||
| Liabilities | ||||||||||||||||||||||
| Interest-bearing deposits | $ | 18 | $ | — | $ | 3 | $ | — | $ | — | $ | — | $ | 2 | $ | — | $ | (1) | $ | 16 | $ | — |
| Securities loaned and sold under agreements to repurchase | 593 | 36 | — | — | — | 437 | 33 | — | (30) | 997 | — | |||||||||||
| Trading account liabilities | ||||||||||||||||||||||
| Securities sold, not yet purchased | 72 | (10) | — | 13 | (2) | 46 | — | — | (36) | 103 | (13) | |||||||||||
| Other trading liabilities | — | (2) | — | — | — | — | — | — | — | 2 | — | |||||||||||
| Short-term borrowings | 81 | 12 | — | 1 | (40) | — | 6 | — | (1) | 35 | (17) | |||||||||||
| Long-term debt | 29,778 | 3,734 | — | 2,831 | (811) | — | 3,838 | — | (192) | 31,710 | 3,336 | |||||||||||
| Other financial liabilities measured on a recurring basis | — | — | (8) | 5 | — | — | — | — | — | 13 | — |
(1)Net realized/unrealized gains (losses) are presented as increase (decrease) to Level 3 assets, and as (increase) decrease to Level 3 liabilities. Changes in fair value of available-for-sale debt securities are recorded in AOCI, unless related to credit impairment, while gains and losses from sales are recorded in Realized gains (losses) from sales of investments in the Consolidated Statement of Income.
(2)Unrealized gains (losses) on MSRs are recorded in Other revenue in the Consolidated Statement of Income.
(3)Represents the amount of total gains or losses for the period, included in earnings (and AOCI for changes in fair value of available-for-sale debt securities and DVA on fair value option liabilities), attributable to the change in fair value relating to assets and liabilities classified as Level 3 that are still held at September 30, 2022.
(4)Total Level 3 derivative assets and liabilities have been netted in these tables for presentation purposes only.
| Net realized/unrealized<br><br>gains (losses) incl. in(1) | Transfers | Unrealized<br>gains (losses)<br>still held(3) | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| In millions of dollars | Dec. 31, 2021 | Principal<br>transactions | Other(1)(2) | into<br>Level 3 | out of<br>Level 3 | Purchases | Issuances | Sales | Settlements | Sept. 30, 2022 | ||||||||||||
| Assets | ||||||||||||||||||||||
| Securities borrowed and purchased under agreements to resell | $ | 231 | $ | (2) | $ | — | $ | — | $ | — | $ | 252 | $ | — | $ | — | $ | (340) | $ | 141 | $ | 14 |
| Trading non-derivative assets | ||||||||||||||||||||||
| Trading mortgage-backed securities | ||||||||||||||||||||||
| U.S. government-sponsored agency guaranteed | 496 | (41) | — | 181 | (311) | 794 | — | (447) | — | 672 | (53) | |||||||||||
| Residential | 104 | (2) | — | 86 | (54) | 118 | — | (110) | — | 142 | (1) | |||||||||||
| Commercial | 81 | (9) | — | 117 | (51) | 14 | — | (36) | — | 116 | 7 | |||||||||||
| Total trading mortgage-backed securities | $ | 681 | $ | (52) | $ | — | $ | 384 | $ | (416) | $ | 926 | $ | — | $ | (593) | $ | — | $ | 930 | $ | (47) |
| U.S. Treasury and federal agency securities | $ | 4 | $ | (4) | $ | — | $ | 2 | $ | (1) | $ | — | $ | — | $ | — | $ | (1) | $ | — | $ | — |
| State and municipal | 37 | 9 | — | 75 | (26) | 15 | — | (88) | — | 22 | (1) | |||||||||||
| Foreign government | 23 | (40) | — | 304 | (5) | 157 | — | (59) | — | 380 | (19) | |||||||||||
| Corporate | 412 | 89 | — | 455 | (350) | 919 | — | (1,065) | — | 460 | (109) | |||||||||||
| Marketable equity securities | 174 | 34 | — | 134 | (99) | 142 | — | (198) | — | 187 | (47) | |||||||||||
| Asset-backed securities | 613 | (26) | — | 208 | (192) | 589 | — | (580) | — | 612 | (151) | |||||||||||
| Other trading assets | 576 | 158 | — | 407 | (372) | 557 | 27 | (662) | (12) | 679 | (95) | |||||||||||
| Total trading non-derivative assets | $ | 2,520 | $ | 168 | $ | — | $ | 1,969 | $ | (1,461) | $ | 3,305 | $ | 27 | $ | (3,245) | $ | (13) | $ | 3,270 | $ | (469) |
| Trading derivatives, net(4) | ||||||||||||||||||||||
| Interest rate contracts | $ | 1,726 | $ | 322 | $ | — | $ | (430) | $ | (815) | $ | (186) | $ | 7 | $ | 77 | $ | (727) | $ | (26) | $ | (332) |
| Foreign exchange contracts | (89) | 993 | — | (443) | (9) | 29 | 20 | (399) | 175 | 277 | 240 | |||||||||||
| Equity contracts | (2,140) | 2,159 | — | (13) | 429 | 58 | — | (288) | (144) | 61 | 1,021 | |||||||||||
| Commodity contracts | 422 | 732 | — | 95 | (543) | 60 | — | (144) | (369) | 253 | 412 | |||||||||||
| Credit derivatives | (31) | (167) | — | (12) | (27) | (36) | — | — | 160 | (113) | (260) | |||||||||||
| Total trading derivatives, net(4) | $ | (112) | $ | 4,039 | $ | — | $ | (803) | $ | (965) | $ | (75) | $ | 27 | $ | (754) | $ | (905) | $ | 452 | $ | 1,081 |
Table continues on the next page.
| Net realized/unrealized<br><br>gains (losses) incl. in(1) | Transfers | Unrealized<br>gains (losses)<br>still held(3) | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| In millions of dollars | Dec. 31, 2021 | Principal<br>transactions | Other(1)(2) | into<br>Level 3 | out of<br>Level 3 | Purchases | Issuances | Sales | Settlements | Sept. 30, 2022 | ||||||||||||
| Investments | ||||||||||||||||||||||
| Mortgage-backed securities | ||||||||||||||||||||||
| U.S. government-sponsored agency guaranteed | $ | 51 | $ | — | $ | (11) | $ | 1 | $ | (10) | $ | 4 | $ | — | $ | (9) | $ | — | $ | 26 | $ | (5) |
| Residential | 94 | — | (10) | — | (39) | 3 | — | (9) | — | 39 | (6) | |||||||||||
| Total investment mortgage-backed securities | $ | 145 | $ | — | $ | (21) | $ | 1 | $ | (49) | $ | 7 | $ | — | $ | (18) | $ | — | $ | 65 | $ | (11) |
| U.S. Treasury and federal agency securities | $ | 1 | $ | — | $ | (1) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — |
| State and municipal | 772 | — | (98) | 81 | (142) | 1 | — | (39) | — | 575 | (73) | |||||||||||
| Foreign government | 786 | — | (92) | 256 | (169) | 609 | — | (530) | — | 860 | (36) | |||||||||||
| Corporate | 188 | — | (3) | 154 | (3) | 1 | — | — | — | 337 | (2) | |||||||||||
| Marketable equity securities | 16 | — | (6) | — | — | — | — | — | — | 10 | — | |||||||||||
| Asset-backed securities | 3 | — | 19 | — | — | — | — | (20) | — | 2 | — | |||||||||||
| Non-marketable equity securities | 316 | — | (15) | 11 | (10) | 107 | — | (25) | — | 384 | — | |||||||||||
| Total investments | $ | 2,227 | $ | — | $ | (217) | $ | 503 | $ | (373) | $ | 725 | $ | — | $ | (632) | $ | — | $ | 2,233 | $ | (122) |
| Loans | $ | 711 | $ | — | $ | (185) | $ | 84 | $ | (198) | $ | — | $ | 334 | $ | — | $ | (111) | $ | 635 | $ | (52) |
| Mortgage servicing rights | 404 | — | 195 | — | — | — | 94 | — | (46) | 647 | 194 | |||||||||||
| Other financial assets measured at fair value on a recurring basis | 73 | — | (13) | 29 | (16) | 21 | 39 | (17) | (66) | 50 | 8 | |||||||||||
| Liabilities | ||||||||||||||||||||||
| Interest-bearing deposits | $ | 183 | $ | — | $ | 6 | $ | 7 | $ | (122) | $ | — | $ | 20 | $ | — | $ | (66) | $ | 16 | $ | — |
| Securities loaned and sold under agreements to repurchase | 643 | 86 | — | — | (3) | 453 | 33 | — | (43) | 997 | — | |||||||||||
| Trading account liabilities | ||||||||||||||||||||||
| Securities sold, not yet purchased | 65 | 11 | — | 48 | (21) | 129 | — | 1 | (108) | 103 | (6) | |||||||||||
| Other trading liabilities | — | (2) | — | — | — | — | — | — | — | 2 | — | |||||||||||
| Short-term borrowings | 105 | 101 | — | 41 | (61) | — | 82 | — | (31) | 35 | (22) | |||||||||||
| Long-term debt | 25,509 | 11,979 | — | 9,574 | (4,318) | — | 13,537 | — | (613) | 31,710 | 9,530 | |||||||||||
| Other financial liabilities measured on a recurring basis | 1 | — | (7) | 5 | — | — | — | — | — | 13 | — |
(1)Net realized/unrealized gains (losses) are presented as increase (decrease) to Level 3 assets, and as (increase) decrease to Level 3 liabilities. Changes in fair value of available-for-sale debt securities are recorded in AOCI, unless related to credit impairment, while gains and losses from sales are recorded in Realized gains (losses) from sales of investments in the Consolidated Statement of Income.
(2)Unrealized gains (losses) on MSRs are recorded in Other revenue in the Consolidated Statement of Income.
(3)Represents the amount of total gains or losses for the period, included in earnings (and AOCI for changes in fair value of available-for-sale debt securities and DVA on fair value option liabilities), attributable to the change in fair value relating to assets and liabilities classified as Level 3 that are still held at September 30, 2022.
(4)Total Level 3 derivative assets and liabilities have been netted in these tables for presentation purposes only.
Level 3 Fair Value Transfers
The following were the significant Level 3 transfers for the period December 31, 2022 to September 30, 2023:
•During the three and nine months ended September 30, 2023, transfers of Long-term debt were $1.0 billion and $4.2 billion from Level 2 to Level 3, respectively. Of the $4.2 billion transfer, approximately $3.6 billion related to interest rate option volatility inputs becoming unobservable and/or significant relative to their overall valuation, and $0.6 billion related to equity and credit derivative inputs (in addition to other volatility inputs, e.g., interest rate volatility inputs) becoming unobservable and/or significant to their overall valuation. In other instances, market changes have resulted in some inputs becoming more observable, and some unobservable inputs becoming less significant to the overall valuation of the instruments (e.g., when an option becomes deep-in or deep-out of the money). This has primarily resulted in $1.3 billion and $7.4 billion of certain structured long-term debt products being transferred from Level 3 to Level 2 during the three and nine months ended September 30, 2023, respectively.
The following were the significant Level 3 transfers for the period December 31, 2021 to September 30, 2022:
•During the three and nine months ended September 30, 2022, transfers of Long-term debt were $2.8 billion and $9.6 billion, respectively, from Level 2 to Level 3. Of the $9.6 billion transfer in the nine months ended September 30, 2022, approximately $6.8 billion related to interest rate option volatility inputs becoming unobservable and/or significant relative to their overall valuation, and $2.8 billion related to equity and credit derivative inputs (in addition to other volatility inputs, e.g., interest rate volatility inputs) becoming unobservable and/or significant to their overall valuation. In other instances, market changes have resulted in some inputs becoming more observable, and some unobservable inputs becoming less significant to the overall valuation of the instruments (e.g., when an option becomes deep-in or deep-out of the money). This has primarily resulted in $0.8 billion and $4.3 billion of certain structured long-term debt products being transferred from Level 3 to Level 2 during the three and nine months ended September 30, 2022, respectively.
Valuation Techniques and Inputs for Level 3 Fair Value Measurements
The following tables present the valuation techniques covering the majority of Level 3 inventory and the most significant unobservable inputs used in Level 3 fair value measurements.
Differences between this table and amounts presented in the Level 3 Fair Value Rollforward table represent individually immaterial items that have been measured using a variety of valuation techniques other than those listed.
| As of September 30, 2023 | Fair value(1)<br><br>(in millions) | Methodology | Input | Low(2)(3) | High(2)(3) | Weighted<br><br>average(4) | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Assets | |||||||||||||
| Securities borrowed and purchased under agreements to resell | $ | 135 | Model-based | Interest rate | 4.62 | % | 4.62 | % | 4.62 | % | |||
| Credit spread | 15 bps | 15 bps | 15 bps | ||||||||||
| Mortgage-backed securities | $ | 614 | Yield analysis | Yield | 5.36 | % | 20.06 | % | 9.29 | % | |||
| 338 | Price-based | Price | $ | 0.96 | $ | 112.94 | $ | 53.66 | |||||
| State and municipal, foreign government, corporate and other debt securities | $ | 2,107 | Price-based | Price | $ | 0.85 | $ | 102.42 | $ | 82.51 | |||
| 792 | Model-based | Credit spread | 35 bps | 550 bps | 290 bps | ||||||||
| Marketable equity securities(5) | $ | 224 | Price-based | Price | $ | — | $ | 9,862.00 | $ | 91.95 | |||
| 33 | Model-based | WAL | 2.49 years | 2.49 years | 2.49 years | ||||||||
| Recovery (in millions) | $ | 7,148 | $ | 7,148 | $ | 7,148 | |||||||
| Appraised value<br><br>(in millions) | $ | 4.38 | $ | 19.30 | $ | 14.40 | |||||||
| Asset-backed securities | $ | 573 | Price-based | Price | $ | 3.97 | $ | 139.76 | $ | 80.52 | |||
| 77 | Yield analysis | Yield | 6.40 | % | 12.43 | % | 8.13 | % | |||||
| Non-marketable equities | $ | 296 | Comparables analysis | Illiquidity discount | 10.00 | % | 20.00 | % | 10.47 | % | |||
| 53 | Cash flow | PE ratio | 12.90x | 15.00x | 13.40x | ||||||||
| 44 | Model-based | Discount to price | 8.50 | % | 33.00 | % | 18.63 | % | |||||
| Revenue multiple | 4.20x | 11.30x | 10.56x | ||||||||||
| Derivatives—gross(6) | |||||||||||||
| Interest rate contracts (gross) | $ | 7,135 | Model-based | IR normal volatility | (9.25) | % | 47.18 | % | 2.25 | % | |||
| Interest rate | 2.48 | % | 3.67 | % | 2.78 | % | |||||||
| Foreign exchange contracts (gross) | $ | 2,201 | Model-based | IR normal volatility | (9.25) | % | 47.39 | % | 3.28 | % | |||
| Equity contracts (gross)(7) | $ | 3,463 | Model-based | Equity volatility | 0.04 | % | 299.19 | % | 38.17 | % | |||
| Equity forward | 64.56 | % | 328.31 | % | 114.08 | % | |||||||
| Equity-FX correlation | (79.00) | % | 70.00 | % | (10.18) | % | |||||||
| WAL | 2.49 years | 2.49 years | 2.49 years | ||||||||||
| Recovery (in millions) | $ | 7,148 | $ | 7,148 | $ | 7,148 | |||||||
| Equity-IR correlation | (25.00) | % | 44.00 | % | 28.54 | % | |||||||
| Commodity and other contracts (gross) | $ | 2,498 | Model-based | Commodity correlation | (39.67) | % | 93.50 | % | (0.46) | % | |||
| Commodity volatility | 7.80 | % | 104.90 | % | 25.13 | % | |||||||
| Forward price | 16.67 | % | 2,000% | 153.87 | % | ||||||||
| Credit derivatives (gross) | $ | 1,170 | Model-based | Credit spread | 8 bps | 775 bps | 108 bps | ||||||
| 433 | Price-based | Recovery rate | 25.00 | % | 40.00 | % | 39.13 | % | |||||
| Credit correlation | 25.00 | % | 90.00 | % | 49.93 | % | |||||||
| Price | $ | 14.86 | $ | 100.07 | $ | 82.59 | |||||||
| Upfront points | (1.66) | % | 99.00 | % | 48.05 | % | |||||||
| Nontrading derivatives and other financial assets and liabilities measured on a recurring basis (gross) | $ | 105 | Price-based | Price | $ | — | $ | 9,862.02 | $ | 86.58 | |||
| Loans and leases | $ | 225 | Price-based | Price | $ | 73.95 | $ | 103.41 | $ | 89.02 | |||
| As of September 30, 2023 | Fair value(1)<br><br>(in millions) | Methodology | Input | Low(2)(3) | High(2)(3) | Weighted<br><br>average(4) | |||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Forward price | 20.39 | % | 534.83 | % | 159.35 | % | |||||||
| Commodity volatility | 7.80 | % | 104.90 | % | 25.13 | % | |||||||
| Commodity correlation | (39.67) | % | 93.50 | % | (0.46) | % | |||||||
| Mortgage servicing rights | $ | 641 | Cash flow | Yield | 0.50 | % | 12.00 | % | 5.68 | % | |||
| WAL | 3.87 years | 9.59 years | 8.06 years | ||||||||||
| Liabilities | |||||||||||||
| Interest-bearing deposits | $ | 85 | Model-based | Price | $ | 100.00 | $ | 100.00 | $ | 100.00 | |||
| 70 | Price-based | Forward price | 100 | % | 100 | % | 100 | % | |||||
| Equity forward | 100 | % | 117 | % | 103 | % | |||||||
| Securities loaned and sold under agreements to repurchase | $ | 481 | Model-based | Interest rate | 4.66 | % | 5.59 | % | 4.71 | % | |||
| Trading account liabilities | |||||||||||||
| Securities sold, not yet purchased and other trading liabilities | $ | 85 | Price-based | Price | $ | — | $ | 259.90 | $ | 78.73 | |||
| Short-term borrowings and <br>long-term debt | $ | 33,941 | Model-based | IR normal volatility | 0.33 | % | 20.00 | % | 1.35 | % | |||
| As of December 31, 2022 | Fair value(1)<br><br>(in millions) | Methodology | Input | Low(2)(3) | High(2)(3) | Weighted<br><br>average(4) | |||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Assets | |||||||||||||
| Securities borrowed and purchased under agreements to resell | $ | 146 | Model-based | Credit spread | 15 bps | 15 bps | 15 bps | ||||||
| Interest rate | 2.61 | % | 2.61 | % | 2.61 | % | |||||||
| Mortgage-backed securities | $ | 228 | Price-based | Price | $ | 1.04 | $ | 99.71 | $ | 51.51 | |||
| 732 | Yield analysis | Yield | 4.41 | % | 20.30 | % | 9.74 | % | |||||
| State and municipal, foreign government, corporate and other debt securities | $ | 2,360 | Price-based | Price | $ | 0.01 | $ | 994.68 | $ | 245.85 | |||
| Marketable equity securities(5) | $ | 147 | Price-based | Price | $ | — | $ | 9,087.76 | $ | 114.29 | |||
| 31 | Model-based | WAL | 2.24 years | 2.24 years | 2.24 years | ||||||||
| Recovery (in millions) | $ | 7,148 | $ | 7,148 | $ | 7,148 | |||||||
| Asset-backed securities | $ | 304 | Price-based | Price | $ | 10.50 | $ | 145.00 | $ | 74.97 | |||
| 308 | Yield analysis | Yield | 5.76 | % | 18.58 | % | 9.34 | % | |||||
| Non-marketable equities | $ | 287 | Comparables analysis | Illiquidity discount | 8.60 | % | 17.00 | % | 10.16 | % | |||
| 101 | Price-based | PE ratio | 14.00x | 15.70x | 15.16x | ||||||||
| Cost of capital | 8.10 | % | 17.50 | % | 10.44 | % | |||||||
| Revenue multiple | 3.60x | 13.90x | 12.40x | ||||||||||
| Derivatives—gross(6) | |||||||||||||
| Interest rate contracts (gross) | $ | 7,108 | Model-based | IR normal volatility | 0.33 | % | 1.82 | % | 0.96 | % | |||
| Foreign exchange contracts (gross) | $ | 1,437 | Model-based | IR normal volatility | 0.33 | % | 1.47 | % | 0.67 | % | |||
| IR basis | (4.23) | % | 9.68 | % | (0.03) | % | |||||||
| Equity volatility | 0.05 | % | 300.72 | % | 33.91 | % | |||||||
| Credit spread | 116 bps | 626 bps | 594 bps | ||||||||||
| Equity contracts (gross)(7) | $ | 4,430 | Model-based | Equity volatility | 0.05 | % | 300.72 | % | 41.47 | % | |||
| Equity forward | 68.34 | % | 271.61 | % | 103.50 | % | |||||||
| Equity-FX correlation | (95.00) | % | 50.00 | % | (16.33) | % | |||||||
| Equity-Equity correlation | (3.98) | % | 98.68 | % | 85.63 | % | |||||||
| WAL | 2.24 years | 2.24 years | 2.24 years | ||||||||||
| Recovery (in millions) | $ | 7,148 | $ | 7,148 | $ | 7,148 | |||||||
| Equity-IR correlation | (18.83) | % | 60.00 | % | 32.37 | % | |||||||
| Commodity and other contracts (gross) | $ | 2,724 | Model-based | Forward price | 14.27 | % | 385.50 | % | 106.08 | % | |||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Commodity volatility | 10.43 | % | 151.50 | % | 33.55 | % | |||||||
| Commodity correlation | (32.00) | % | 91.94 | % | 36.70 | % | |||||||
| Credit derivatives (gross) | $ | 1,520 | Model-based | Credit spread | 2.50 bps | 955.10 bps | 101.27 bps | ||||||
| 439 | Price-based | Recovery rate | 25.00 | % | 75.00 | % | 42.27 | % | |||||
| Credit correlation | 25.00 | % | 80.00 | % | 42.38 | % | |||||||
| Price | $ | 31.71 | $ | 99.00 | $ | 78.75 | |||||||
| Credit spread volatility | 35.58 | % | 64.79 | % | 40.47 | % | |||||||
| Non-trading derivatives and other financial assets and liabilities measured on a recurring basis (gross) | $ | 57 | Price-based | Price | $ | 80.16 | $ | 105.32 | $ | 92.65 | |||
| Loans and leases | $ | 1,059 | Model-based | Equity volatility | 0.05 | % | 300.72 | % | 42.62 | % | |||
| 304 | Price-based | Forward price | 14.27 | % | 324.85 | % | 105.07 | % | |||||
| Price | $ | 0.01 | $ | 100.53 | $ | 84.77 | |||||||
| Equity forward | 68.34 | % | 271.61 | % | 103.49 | % | |||||||
| Mortgage servicing rights | $ | 580 | Cash flow | Yield | (0.40) | % | 13.20 | % | 5.36 | % | |||
| 84 | Model-based | WAL | 3.92 years | 9.33 years | 7.71 years | ||||||||
| Liabilities | |||||||||||||
| Interest-bearing deposits | $ | 15 | Model-based | Forward price | 100.00 | % | 101.30 | % | 100.07 | % | |||
| Securities loaned and sold under agreements to repurchase | $ | 970 | Model-based | Interest rate | 4.01 | % | 4.97 | % | 4.07 | % | |||
| Trading account liabilities | |||||||||||||
| Securities sold, not yet purchased and other trading liabilities | $ | 47 | Price-based | Price | $ | — | $ | 9,087.76 | $ | 41.22 | |||
| 6 | Model-based | FX volatility | 2.00 | % | 40.00 | % | 12.85 | % | |||||
| Short-term borrowings and <br>long-term debt | $ | 36,155 | Model-based | IR normal volatility | 0.33 | % | 1.82 | % | 0.89 | % |
(1)The tables above include the fair values for the items listed and may not foot to the total population for each category.
(2)Some inputs are shown as zero due to rounding.
(3)When the low and high inputs are the same, there is either a constant input applied to all positions, or the methodology involving the input applies to only one large position.
(4)Weighted averages are calculated based on the fair values of the instruments.
(5)For equity securities, the price inputs are expressed on an absolute basis, not as a percentage of the notional amount.
(6)Both trading and non-trading account derivatives—assets and liabilities—are presented on a gross absolute value basis.
(7)Includes hybrid products.
Items Measured at Fair Value on a Nonrecurring Basis
Certain assets and liabilities are measured at fair value on a nonrecurring basis and, therefore, are not included in the tables above. These include assets measured at cost that have been written down to fair value during the periods as a result of an impairment. These also include non-marketable equity securities that have been measured using the measurement alternative and are either (i) written down to fair value during the periods as a result of an impairment or (ii) adjusted upward or downward to fair value as a result of a transaction observed during the periods for an identical or similar investment in the same issuer. In addition, these assets include loans held-for-sale and other real estate owned that are measured at the lower of cost or market value.
The following tables present the carrying amounts of all assets that were still held for which a nonrecurring fair value measurement was recorded:
| In millions of dollars | Fair value | Level 2 | Level 3 | |||
|---|---|---|---|---|---|---|
| September 30, 2023 | ||||||
| Loans HFS(1) | $ | 1,547 | $ | 354 | $ | 1,193 |
| Other real estate owned | 2 | — | 2 | |||
| Loans(2) | 407 | — | 407 | |||
| Non-marketable equity securities measured using the measurement alternative | 60 | — | 60 | |||
| Total assets at fair value on a nonrecurring basis | $ | 2,016 | $ | 354 | $ | 1,662 |
| In millions of dollars | Fair value | Level 2 | Level 3 | |||
| --- | --- | --- | --- | --- | --- | --- |
| December 31, 2022 | ||||||
| Loans HFS(1) | $ | 2,336 | $ | 457 | $ | 1,879 |
| Other real estate owned | 1 | — | 1 | |||
| Loans(2) | 69 | — | 69 | |||
| Non-marketable equity securities measured using the measurement alternative | 597 | — | 597 | |||
| Total assets at fair value on a nonrecurring basis | $ | 3,003 | $ | 457 | $ | 2,546 |
(1)Net of mark-to-market amounts on the unfunded portion of loans HFS recognized as Other liabilities on the Consolidated Balance Sheet.
(2)Represents impaired loans held for investment whose carrying amount is based on the fair value of the underlying collateral less costs to sell, primarily real estate.
Valuation Techniques and Inputs for Level 3 Nonrecurring Fair Value Measurements
The following tables present the valuation techniques covering the majority of Level 3 nonrecurring fair value measurements and the most significant unobservable inputs used in those measurements:
| As of September 30, 2023 | Fair value(1)<br><br>(in millions) | Methodology | Input | Low(2) | High | Weighted<br><br>average(3) | ||||
|---|---|---|---|---|---|---|---|---|---|---|
| Loans HFS | $ | 1,192 | Price-based | Price | $ | 75.00 | $ | 99.66 | $ | 93.93 |
| Other real estate owned | $ | 2 | Price-based | Appraised value(4) | $ | 51,210 | $ | 627,594 | $ | 380,813 |
| Loans(5) | $ | 375 | Recovery analysis | Appraised value(4) | $ | 12,000 | $ | 271,763,454 | $ | 208,321,959 |
| Non-marketable equity securities measured using the measurement alternative | $ | 42 | Price-based | Price | $ | 3.04 | $ | 28.21 | $ | 11.06 |
| 17 | Comparable analysis | Revenue multiple | 2.60x | 35.70x | 16.13x | |||||
| As of December 31, 2022 | Fair value(1)<br><br>(in millions) | Methodology | Input | Low(2) | High | Weighted<br><br>average(3) | ||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Loans HFS | $ | 1,830 | Price-based | Price | $ | 0.88 | $ | 100.23 | $ | 65.91 |
| Other real estate owned | $ | 1 | Price-based | Appraised value(4) | $ | 30,000 | $ | 441,750 | $ | 310,552 |
| Loans(5) | $ | 45 | Recovery analysis | Appraised value(4) | $ | 12,000 | $ | 14,022,820 | $ | 3,714,342 |
| 24 | Appraised value | |||||||||
| Non-marketable equity securities measured using the measurement alternative | $ | 234 | Comparable analysis | Revenue multiple | 4.95x | 73.10x | 19.68x | |||
| 363 | Price-based | Price | $ | 0.46 | $ | 2,416.43 | $ | 557.86 |
(1)The tables above include the fair values for the items listed and may not foot to the total population for each category.
(2)Some inputs are shown as zero due to rounding.
(3)Weighted averages are calculated based on the fair values of the instruments.
(4)Appraised values are disclosed in whole dollars.
(5)Represents impaired loans held for investment whose carrying amount is based on the fair value of the underlying collateral less costs to sell, primarily real estate.
Nonrecurring Fair Value Changes
The following table presents total nonrecurring fair value measurements for the period, included in earnings, attributable to the change in fair value relating to assets that were still held:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||
|---|---|---|---|---|---|---|---|---|
| In millions of dollars | 2023 | 2022 | 2023 | 2022 | ||||
| Loans HFS | $ | — | $ | (250) | $ | 6 | $ | (413) |
| Other real estate owned | — | — | — | — | ||||
| Loans(1) | (82) | 10 | (110) | 17 | ||||
| Non-marketable equity securities measured using the measurement alternative | (12) | (14) | (69) | 114 | ||||
| Total nonrecurring fair value gains (losses) | $ | (94) | $ | (254) | $ | (173) | $ | (282) |
(1)Represents loans held for investment whose carrying amount is based on the fair value of the underlying collateral less costs to sell, primarily real estate.
Estimated Fair Value of Financial Instruments Not Carried at Fair Value
The following tables present the carrying value and fair value of Citigroup’s financial instruments that are not carried at fair value. The tables below therefore exclude items measured at fair value on a recurring basis presented in the tables above.
| September 30, 2023 | Estimated fair value | |||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Carrying<br>value | Estimated<br>fair value | |||||||||||||||||||||||||
| In billions of dollars | Level 1 | Level 2 | Level 3 | |||||||||||||||||||||||
| Assets | ||||||||||||||||||||||||||
| HTM debt securities, net of allowance(1) | $ | 264.9 | $ | 236.8 | $ | 123.7 | $ | 110.5 | $ | 2.6 | ||||||||||||||||
| Securities borrowed and purchased under agreements to resell | 128.9 | 129.0 | — | 129.0 | — | |||||||||||||||||||||
| Loans(2)(3) | 641.1 | 646.0 | — | — | 646.0 | |||||||||||||||||||||
| Other financial assets(3)(4) | 352.4 | 352.4 | 236.2 | 17.8 | 98.4 | |||||||||||||||||||||
| Liabilities | ||||||||||||||||||||||||||
| Deposits | $ | 1,270.8 | $ | 1,270.1 | $ | — | $ | 1,078.5 | $ | 191.6 | ||||||||||||||||
| Securities loaned and sold under agreements to repurchase | 196.1 | 196.1 | — | 196.1 | — | |||||||||||||||||||||
| Long-term debt(5) | 163.1 | 162.2 | — | 153.5 | 8.7 | |||||||||||||||||||||
| Other financial liabilities(6) | 144.8 | 144.8 | — | 34.2 | 110.6 | December 31, 2022 | Estimated fair value | |||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||||||||||||
| Carrying<br>value | Estimated<br>fair value | |||||||||||||||||||||||||
| In billions of dollars | Level 1 | Level 2 | Level 3 | |||||||||||||||||||||||
| Assets | ||||||||||||||||||||||||||
| HTM debt securities, net of allowance(1) | $ | 274.3 | $ | 249.2 | $ | 123.2 | $ | 123.1 | $ | 2.9 | ||||||||||||||||
| Securities borrowed and purchased under agreements to resell | 125.9 | 125.9 | — | 125.9 | — | |||||||||||||||||||||
| Loans(2)(3) | 634.5 | 634.9 | — | — | 634.9 | |||||||||||||||||||||
| Other financial assets(3)(4) | 427.1 | 427.1 | 320.0 | 22.0 | 85.1 | |||||||||||||||||||||
| Liabilities | ||||||||||||||||||||||||||
| Deposits | $ | 1,364.1 | $ | 1,345.4 | $ | — | $ | 1,159.4 | $ | 186.0 | ||||||||||||||||
| Securities loaned and sold under agreements to repurchase | 131.6 | 131.6 | — | 131.6 | — | |||||||||||||||||||||
| Long-term debt(5) | 165.6 | 160.5 | — | 151.1 | 9.4 | |||||||||||||||||||||
| Other financial liabilities(6) | 142.4 | 142.4 | — | 26.5 | 115.9 |
(1)Includes $5.4 billion and $5.5 billion of non-marketable equity securities carried at cost at September 30, 2023 and December 31, 2022, respectively.
(2)The carrying value of loans is net of the allowance for credit losses on loans of $17.6 billion for September 30, 2023 and $17.0 billion for December 31, 2022. In addition, the carrying values exclude $0.3 billion and $0.4 billion of lease finance receivables at September 30, 2023 and December 31, 2022, respectively.
(3)Includes items measured at fair value on a nonrecurring basis.
(4)Includes cash and due from banks, deposits with banks, brokerage receivables, reinsurance recoverables 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.
(5)The carrying value includes long-term debt balances under qualifying fair value hedges.
(6)Includes brokerage payables, separate and variable accounts, short-term borrowings (carried at cost) 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.
The estimated fair values of the Company’s corporate unfunded lending commitments at September 30, 2023 and December 31, 2022 were off-balance sheet liabilities of $8.3 billion and $13.7 billion, respectively, substantially all of which are classified as Level 3. The Company does not estimate the fair values of consumer unfunded lending commitments, which are generally cancelable by providing notice to the borrower.
23. FAIR VALUE ELECTIONS
The Company may elect to report most financial instruments and certain other items at fair value on an instrument-by-instrument basis with changes in fair value reported in earnings, other than DVA (see below). The election is made upon the initial recognition of an eligible financial asset, financial liability or firm commitment or when certain specified reconsideration events occur. The fair value election may not otherwise be revoked once an election is made. The changes in fair value are recorded in current earnings. Movements in DVA are reported as a component of AOCI.
The Company has elected fair value accounting for its mortgage servicing rights (MSRs). See Note 20 for additional details on Citi’s MSRs. Additional discussion regarding other applicable areas in which fair value elections were made is presented in Note 22.
The following table presents the changes in fair value of those items for which the fair value option has been elected:
| Changes in fair value—gains (losses) | ||||||||
|---|---|---|---|---|---|---|---|---|
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||
| In millions of dollars | 2023 | 2022 | 2023 | 2022 | ||||
| Assets | ||||||||
| Securities borrowed and purchased under agreements to resell | $ | 69 | $ | (82) | $ | 59 | $ | (165) |
| Trading account assets | (14) | (69) | 65 | (307) | ||||
| Loans | ||||||||
| Certain corporate loans | 1,036 | 372 | 1,362 | (2,227) | ||||
| Certain consumer loans | (10) | — | (9) | (1) | ||||
| Total loans | $ | 1,026 | $ | 372 | $ | 1,353 | $ | (2,228) |
| Other assets | ||||||||
| MSRs | $ | 42 | $ | 37 | $ | 61 | $ | 195 |
| Certain mortgage loans HFS(1) | (28) | (110) | (38) | (440) | ||||
| Total other assets | $ | 14 | $ | (73) | $ | 23 | $ | (245) |
| Total assets | $ | 1,095 | $ | (596) | $ | 1,500 | $ | (2,945) |
| Liabilities | ||||||||
| Interest-bearing deposits | $ | 18 | $ | 133 | $ | (34) | $ | 10 |
| Securities loaned and sold under agreements to repurchase | (63) | 63 | (82) | 159 | ||||
| Trading account liabilities | (151) | 208 | 1 | (241) | ||||
| Short-term borrowings(2) | 144 | 61 | 232 | 1,257 | ||||
| Long-term debt(2) | 2,443 | 4,922 | (4,053) | 20,635 | ||||
| Total liabilities | $ | 2,391 | $ | 5,387 | $ | (3,936) | $ | 21,820 |
(1)Includes gains (losses) associated with interest rate lock commitments for originated loans for which the Company has elected the fair value option.
(2)Includes DVA that is included in AOCI. See Notes 18 and 22.
Own Debt Valuation Adjustments (DVA)
Own debt valuation adjustments are recognized on Citi’s liabilities for which the fair value option has been elected using Citi’s credit spreads observed in the bond market. Changes in fair value of fair value option liabilities related to changes in Citigroup’s own credit spreads (DVA) are reflected as a component of AOCI. See Note 18 for additional information.
Among other variables, the fair value of liabilities for which the fair value option has been elected (other than non-recourse debt and similar liabilities) is impacted by the narrowing or widening of the Company’s credit spreads.
The estimated changes in the fair value of these non-derivative liabilities due to such changes in the Company’s own credit spread (or instrument-specific credit risk) were a gain of $395 million and a gain of $1,159 million for the three months ended September 30, 2023 and 2022, respectively, and a loss of $(875) million and a gain of $4,800 million for the nine months ended September 30, 2023 and 2022, respectively. Changes in fair value resulting from changes in instrument-specific credit risk were estimated by incorporating the Company’s current credit spreads observable in the bond market into the relevant valuation technique used to value each liability as described above.
The Fair Value Option for Financial Assets and Financial Liabilities
Selected Portfolios of Securities Purchased Under Agreements to Resell, Securities Borrowed, Securities Sold Under Agreements to Repurchase, Securities Loaned and Certain Uncollateralized Short-Term Borrowings
The Company elected the fair value option for certain portfolios of fixed income securities purchased under agreements to resell and fixed income securities sold under agreements to repurchase, securities borrowed, securities loaned and certain uncollateralized short-term borrowings held primarily by broker-dealer entities in the United States, the United Kingdom and Japan. In each case, the election was made because the related interest rate risk is managed on a portfolio basis, primarily with offsetting derivative instruments that are accounted for at fair value through earnings.
Changes in fair value for transactions in these portfolios are recorded in Principal transactions. The related interest revenue and interest expense are measured based on the contractual rates specified in the transactions and are reported as Interest revenue and Interest expense in the Consolidated Statement of Income.
Certain Loans and Other Credit Products
Citigroup has also elected the fair value option for certain other originated and purchased loans, including certain unfunded loan products, such as guarantees and letters of credit, executed by Citigroup’s lending and trading businesses. None of these credit products are highly leveraged financing commitments. Significant groups of transactions include loans and unfunded loan products that are expected to be either sold or securitized in the near term, or transactions where the economic risks are hedged with derivative instruments, such as purchased credit default swaps or total return swaps where the Company pays the total return on the underlying loans to a third party. Citigroup has elected the fair value option to mitigate accounting mismatches in cases where hedge accounting is complex and to achieve operational simplifications. Fair value was not elected for most lending transactions across the Company.
The following table provides information about certain credit products carried at fair value:
| September 30, 2023 | December 31, 2022 | |||||||
|---|---|---|---|---|---|---|---|---|
| In millions of dollars | Trading assets | Loans | Trading assets | Loans | ||||
| Carrying amount reported on the Consolidated Balance Sheet | $ | 4,340 | $ | 7,411 | $ | 6,011 | $ | 5,360 |
| Aggregate unpaid principal balance in excess of (less than) fair value | 120 | 60 | 167 | 51 | ||||
| Balance of non-accrual loans or loans more than 90 days past due | — | 1 | — | 2 | ||||
| Aggregate unpaid principal balance in excess of (less than) fair value for non-accrual loans or loans more than 90 days past due | — | 1 | — | — |
In addition to the amounts reported above, $541 million and $729 million of unfunded commitments related to certain credit products selected for fair value accounting were outstanding as of September 30, 2023 and December 31, 2022, respectively.
Changes in the fair value of funded and unfunded credit products are classified in Principal transactions in Citi’s Consolidated Statement of Income. Related interest revenue is measured based on the contractual interest rates and reported as Interest revenue on Trading account assets or loan interest depending on the balance sheet classifications of the credit products. The changes in fair value for the three months ended September 30, 2023 and 2022 due to instrument-specific credit risk totaled to a loss of $(27) million and $(69) million, respectively. Changes in fair value due to instrument-specific credit risk are estimated based on changes in borrower-specific credit spreads and recovery assumptions.
Certain Investments in Unallocated Precious Metals
Citigroup invests in unallocated precious metals accounts (e.g., gold, silver, platinum and palladium) as part of its commodity trading activities. Under ASC 815, the investment is bifurcated into a debt host contract and a commodity derivative instrument. Citigroup elects the fair value option for the debt host contract, and reports the contract within Trading account assets on the Company’s Consolidated Balance Sheet.
The total carrying amount of debt host contracts across unallocated precious metals accounts was approximately $0.4 billion and $0.3 billion at September 30, 2023 and December 31, 2022, respectively.
As part of its commodity trading activities, Citi trades unallocated precious metals investments and executes forward purchase and forward sale derivative contracts with trading counterparties. When Citi sells an unallocated precious metals investment, Citi’s receivable from its depository bank is repaid and Citi derecognizes its investment in the unallocated precious metal. The forward purchase or sale contract with the trading counterparty indexed to unallocated precious metals is accounted for as a derivative, at fair value through earnings.
Certain Mortgage Loans Held-for-Sale (HFS)
Citigroup has elected the fair value option for certain purchased and originated prime fixed-rate and conforming adjustable-rate first mortgage loans HFS. These loans are intended for sale or securitization and are economically hedged with derivative instruments. The Company has elected the fair value option to mitigate accounting mismatches in cases where hedge accounting is complex and to achieve operational simplifications.
The following table provides information about certain mortgage loans HFS carried at fair value:
| In millions of dollars | September 30,<br>2023 | December 31, 2022 | ||
|---|---|---|---|---|
| Carrying amount reported on the Consolidated Balance Sheet | $ | 551 | $ | 793 |
| Aggregate fair value in excess of (less than) unpaid principal balance | (17) | (10) | ||
| Balance of non-accrual loans or loans more than 90 days past due | 3 | 1 | ||
| Aggregate unpaid principal balance in excess of fair value for non-accrual loans<br>or loans more than 90 days past due | — | — |
The changes in the fair values of these mortgage loans are reported in Other revenue in the Company’s Consolidated Statement of Income. There was no net change in fair value during the nine months ended September 30, 2023 and 2022 due to instrument-specific credit risk. Changes in fair value due to instrument-specific credit risk are estimated based on changes in the borrower default, prepayment and recovery forecasts in addition to instrument-specific credit spread. Related interest income continues to be measured based on the contractual interest rates and reported as Interest revenue in the Consolidated Statement of Income.
Certain Debt Liabilities
The Company has elected the fair value option for certain debt liabilities, because these exposures are considered to be trading-related positions and, therefore, are managed on a fair value basis. These positions are classified as Long-term debt or Short-term borrowings on the Company’s Consolidated Balance Sheet.
The following table provides information about the carrying value of notes carried at fair value, disaggregated by type of risk:
| In billions of dollars | September 30, 2023 | December 31, 2022 | ||
|---|---|---|---|---|
| Interest rate linked | $ | 55.1 | $ | 53.4 |
| Foreign exchange linked | — | 0.1 | ||
| Equity linked | 47.4 | 42.5 | ||
| Commodity linked | 5.3 | 5.0 | ||
| Credit linked | 4.8 | 5.0 | ||
| Total | $ | 112.6 | $ | 106.0 |
The portion of the changes in fair value attributable to changes in Citigroup’s own credit spreads (DVA) is reflected as a component of AOCI while all other changes in fair value are reported in Principal transactions. Changes in the fair value of these liabilities include accrued interest, which is also included in the change in fair value reported in Principal transactions.
The following table provides information about long-term debt carried at fair value:
| In millions of dollars | September 30, 2023 | December 31, 2022 | ||
|---|---|---|---|---|
| Carrying amount reported on the Consolidated Balance Sheet | $ | 112,629 | $ | 105,995 |
| Aggregate unpaid principal balance in excess of (less than) fair value | (2,616) | (2,944) |
The following table provides information about short-term borrowings carried at fair value:
| In millions of dollars | September 30, 2023 | December 31, 2022 | ||
|---|---|---|---|---|
| Carrying amount reported on the Consolidated Balance Sheet | $ | 6,470 | $ | 6,222 |
| Aggregate unpaid principal balance in excess of (less than) fair value | (12) | (9) |
24. GUARANTEES AND COMMITMENTS
The following tables present information about Citi’s guarantees at September 30, 2023 and December 31, 2022.
For additional information on Citi’s guarantees and indemnifications included in the tables below, as well as its other guarantees and indemnifications excluded from these tables, see Note 27 to the Consolidated Financial Statements in Citi’s 2022 Form 10-K.
| Maximum potential amount of future payments | ||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| In billions of dollars at September 30, 2023 | Expire within<br>1 year | Expire after<br>1 year | Total amount<br>outstanding | Carrying value<br><br>(in millions of dollars) | ||||||||||||||
| Financial standby letters of credit | $ | 20.8 | $ | 64.5 | $ | 85.3 | $ | 759 | ||||||||||
| Performance guarantees | 4.7 | 5.8 | 10.5 | 47 | ||||||||||||||
| Derivative instruments considered to be guarantees | 18.0 | 19.2 | 37.2 | 326 | ||||||||||||||
| Loans sold with recourse | 0.6 | 1.2 | 1.8 | 16 | ||||||||||||||
| Securities lending indemnifications(1) | 110.2 | — | 110.2 | — | ||||||||||||||
| Credit card merchant processing(2) | 136.8 | — | 136.8 | 1 | ||||||||||||||
| Credit card arrangements with partners | — | 0.4 | 0.4 | 5 | ||||||||||||||
| Other | 31.3 | 8.4 | 39.7 | 50 | ||||||||||||||
| Total | $ | 322.4 | $ | 99.5 | $ | 421.9 | $ | 1,204 | Maximum potential amount of future payments | |||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||||||||
| In billions of dollars at December 31, 2022 | Expire within<br>1 year | Expire after<br>1 year | Total amount<br>outstanding | Carrying value<br><br>(in millions of dollars) | ||||||||||||||
| Financial standby letters of credit | $ | 31.3 | $ | 58.3 | $ | 89.6 | $ | 905 | ||||||||||
| Performance guarantees | 6.1 | 5.6 | 11.7 | 65 | ||||||||||||||
| Derivative instruments considered to be guarantees | 18.5 | 30.0 | 48.5 | 353 | ||||||||||||||
| Loans sold with recourse | — | 1.7 | 1.7 | 13 | ||||||||||||||
| Securities lending indemnifications(1) | 95.9 | — | 95.9 | — | ||||||||||||||
| Credit card merchant processing(2) | 129.6 | — | 129.6 | 1 | ||||||||||||||
| Credit card arrangements with partners | — | 0.6 | 0.6 | 7 | ||||||||||||||
| Other | 0.1 | 8.4 | 8.5 | 32 | ||||||||||||||
| Total | $ | 281.5 | $ | 104.6 | $ | 386.1 | $ | 1,376 |
(1)The carrying values of securities lending indemnifications were not material for either period presented, as the probability of potential liabilities arising from these guarantees is minimal.
(2)At September 30, 2023 and December 31, 2022, this maximum potential exposure was estimated to be approximately $137 billion and $130 billion, respectively. However, Citi believes that the maximum exposure is not representative of the actual potential loss exposure based on its historical experience. This contingent liability is unlikely to arise, as most products and services are delivered when purchased and amounts are refunded when items are returned to merchants.
Loans Sold with Recourse
In addition to the amounts presented in the tables above, the repurchase reserve was approximately $11 million and $10 million at September 30, 2023 and December 31, 2022, respectively, and these amounts are included in Other liabilities on the Consolidated Balance Sheet.
For additional information on Citi’s loans sold with recourse, see Note 27 to the Consolidated Financial Statements in Citi’s 2022 Form 10-K.
Credit Card Arrangements with Partners
Citi, in one of its credit card partner arrangements, provides guarantees to the partner regarding the volume of certain customer originations during the term of the agreement. To the extent that such origination targets are not met, the guarantees serve to compensate the partner for certain payments that otherwise would have been generated in connection with such originations.
Other Guarantees and Indemnifications
Credit Card Protection Programs
Citi, through its credit card businesses, provides various cardholder protection programs on several of its card products, including programs that provide insurance coverage for rental cars, coverage for certain losses associated with purchased products, price protection for certain purchases and protection for lost luggage. These guarantees are not included in the table, since the total outstanding amount of the guarantees and Citi’s maximum exposure to loss cannot be quantified. The protection is limited to certain types of purchases and losses, and it is not possible to quantify the purchases that would qualify for these benefits at any given time. Citi assesses the probability and amount of its potential liability related to these programs based on the extent and nature of its historical loss experience. At September 30, 2023 and December 31, 2022, the actual and estimated losses incurred and the carrying value of Citi’s obligations related to these programs were immaterial.
Value-Transfer Networks (Including Exchanges and Clearing Houses) (VTNs)
Citi is a member of, or shareholder in, hundreds of value-transfer networks (VTNs) (payment, clearing and settlement systems as well as exchanges) around the world. As a condition of membership, many of these VTNs require that members stand ready to pay a pro rata share of the losses incurred by the organization due to another member’s default on its obligations. Citi’s potential obligations may be limited to its membership interests in the VTNs, contributions to the VTN’s funds, or, in certain narrow cases, to the full pro rata share. The maximum exposure is difficult to estimate as this would require an assessment of claims that have not yet occurred; however, Citi believes the risk of loss is remote given historical experience with the VTNs. Accordingly, Citi’s participation in VTNs is not reported in the guarantees tables above, and there are no amounts reflected on the Consolidated Balance Sheet as of September 30, 2023 or December 31, 2022 for potential obligations that could arise from Citi’s involvement with VTN associations.
Long-Term Care (LTC) Insurance Indemnification
Citi has an indemnification contingency to Brighthouse Financial in connection with Citi’s sale of an insurance subsidiary. A liability under this indemnification agreement is currently remote because Brighthouse Financial would become responsible for LTC policyholder claims only when both the reinsurance provided by other parties ceases and trust assets set aside to meet these claims are not adequate. However, should events occur causing both the reinsurance protection and trust collateral to become insufficient to cover Brighthouse Financial’s LTC policyholder claims, Citi will be required to either estimate and disclose a reasonably possible loss or range of loss to the extent that such an estimate can be made, or to accrue for such liability if the event becomes probable and estimable. Citi continues to closely monitor its potential exposure under this indemnification obligation. For additional information, see Note 27 to the Consolidated Financial Statements in Citi’s 2022 Form 10-K.
Futures and Over-the-Counter Derivatives Clearing
Citi provides clearing services on central clearing parties (CCP) for clients that need to clear exchange-traded and over-the-counter (OTC) derivatives contracts with CCPs. Based on all relevant facts and circumstances, Citi has concluded that it acts as an agent for accounting purposes in its role as clearing member for these client transactions. As such, Citi does not reflect the underlying exchange-traded or OTC derivatives contracts in its Consolidated Financial Statements. See Note 21 for a discussion of Citi’s derivatives activities that are reflected in its Consolidated Financial Statements.
As a clearing member, Citi collects and remits cash and securities collateral (margin) between its clients and the respective CCP. In certain circumstances, Citi collects a higher amount of cash (or securities) from its clients than it needs to remit to the CCPs. This excess cash is then held at depository institutions such as banks or carry brokers.
There are two types of margin: initial and variation. Where Citi obtains benefits from or controls cash initial margin (e.g., retains an interest spread), cash initial margin collected from clients and remitted to the CCP or depository institutions is reflected within Brokerage payables (payables to customers) and Brokerage receivables (receivables from brokers, dealers and clearing organizations) or Cash and due from banks, respectively.
However, for exchange-traded and OTC-cleared derivatives contracts where Citi does not obtain benefits from or control the client cash balances, the client cash initial margin collected from clients and remitted to the CCP or depository institutions is not reflected on Citi’s Consolidated Balance Sheet. These conditions are met when Citi has contractually agreed with the client that (i) Citi will pass through to the client all interest paid by the CCP or depository institutions on the cash initial margin, (ii) Citi will not utilize its right as a clearing member to transform cash margin into other assets, (iii) Citi does not guarantee and is not liable to the client for the performance of the CCP or the depository institution and (iv) the client cash balances are legally isolated from Citi’s bankruptcy estate. The total amount of cash initial margin collected and remitted in this manner was
approximately $17.3 billion and $18.0 billion as of September 30, 2023 and December 31, 2022, respectively.
Variation margin due from clients to the respective CCP, or from the CCP to clients, reflects changes in the value of the client’s derivative contracts for each trading day. As a clearing member, Citi is exposed to the risk of non-performance by clients (e.g., failure of a client to post variation margin to the CCP for negative changes in the value of the client’s derivative contracts). In the event of non-performance by a client, Citi would move to close out the client’s positions. The CCP would typically utilize initial margin posted by the client and held by the CCP, with any remaining shortfalls required to be paid by Citi as clearing member. Citi generally holds incremental cash or securities margin posted by the client, which would typically be expected to be sufficient to mitigate Citi’s credit risk in the event the client fails to perform.
As required by ASC 860-30-25-5, securities collateral posted by clients is not recognized on Citi’s Consolidated Balance Sheet.
FICC Sponsored Member Repo Program
Citi acts as a sponsoring member of the Government Securities Division of the Fixed Income Clearing Corporation (FICC) to clear eligible resale and repurchase agreements on behalf of its clients that become sponsored members of the FICC. Citi, as sponsoring member, is required to provide a guarantee to the FICC with respect to the prompt payment and performance of its sponsored members. Because Citi obtains a security interest in the cash or high-quality securities collateral that the clients place with the clearing house, Citi expects the risk of loss from this guarantee to be remote. See Note 10 for additional information on Citi’s resale and repurchase agreements, including risk mitigation practices for these transactions.
Carrying Value—Guarantees and Indemnifications
At September 30, 2023 and December 31, 2022, the total carrying amounts of the liabilities related to the guarantees and indemnifications included in the tables above amounted to approximately $1.2 billion and $1.4 billion, respectively. The carrying value of financial and performance guarantees is included in Other liabilities. For loans sold with recourse, the carrying value of the liability is included in Other liabilities.
Collateral
Cash collateral available to Citi to reimburse losses realized under these guarantees and indemnifications amounted to $49.8 billion and $51.8 billion at September 30, 2023 and December 31, 2022, respectively. Securities and other marketable assets held as collateral amounted to $76.3 billion and $63.7 billion at September 30, 2023 and December 31, 2022, respectively. The majority of collateral is held to reimburse losses realized under securities lending indemnifications. In addition, letters of credit in favor of Citi held as collateral amounted to $3.4 billion and $3.7 billion at September 30, 2023 and December 31, 2022, respectively. Other property may also be available to Citi to cover losses under certain guarantees and indemnifications; however, the value of such property has not been determined.
Performance Risk
Presented in the tables below are the maximum potential amounts of future payments that are classified based on internal and external credit ratings. The determination of the maximum potential future payments is based on the notional amount of the guarantees without consideration of possible recoveries under recourse provisions or from collateral held or pledged. As such, Citi believes such amounts bear no relationship to the anticipated losses, if any, on these guarantees.
| Maximum potential amount of future payments | ||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| In billions of dollars at September 30, 2023 | Investment<br>grade | Non-investment<br>grade | Not<br>rated | Total | ||||||||||||||
| Financial standby letters of credit | $ | 74.3 | $ | 11.0 | $ | — | $ | 85.3 | ||||||||||
| Loans sold with recourse | — | — | 1.8 | 1.8 | ||||||||||||||
| Other | 17.4 | 22.3 | — | 39.7 | ||||||||||||||
| Total | $ | 91.7 | $ | 33.3 | $ | 1.8 | $ | 126.8 | Maximum potential amount of future payments | |||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||||||||
| In billions of dollars at December 31, 2022 | Investment<br>grade | Non-investment<br>grade | Not<br>rated | Total | ||||||||||||||
| Financial standby letters of credit | $ | 77.9 | $ | 10.4 | $ | 1.3 | $ | 89.6 | ||||||||||
| Loans sold with recourse | — | — | 1.7 | 1.7 | ||||||||||||||
| Other | — | 8.5 | — | 8.5 | ||||||||||||||
| Total | $ | 77.9 | $ | 18.9 | $ | 3.0 | $ | 99.8 |
Credit Commitments and Lines of Credit
The majority of unused commitments are contingent upon customers maintaining specific credit standards. Commercial commitments generally have floating interest rates and fixed expiration dates and may require payment of fees. Such fees (net of certain direct costs) are deferred and, upon exercise of the commitment, amortized over the life of the loan or, if exercise is deemed remote, amortized over the commitment period.
The table below summarizes Citigroup’s credit commitments:
| In millions of dollars | U.S. | Outside of<br><br>U.S.(1) | September 30,<br>2023 | December 31, 2022 | ||||
|---|---|---|---|---|---|---|---|---|
| Commercial and similar letters of credit | $ | 659 | $ | 4,549 | $ | 5,208 | $ | 5,316 |
| One- to four-family residential mortgages | 756 | 687 | 1,443 | 2,394 | ||||
| Revolving open-end loans secured by one- to four-family residential properties | 5,553 | 25 | 5,578 | 6,380 | ||||
| Commercial real estate, construction and land development | 13,451 | 2,045 | 15,496 | 15,170 | ||||
| Credit card lines | 614,535 | 64,459 | 678,994 | 683,232 | ||||
| Commercial and other consumer loan commitments | 205,749 | 108,703 | 314,452 | 297,399 | ||||
| Other commitments and contingencies(2) | 5,381 | 105 | 5,486 | 5,673 | ||||
| Total | $ | 846,084 | $ | 180,573 | $ | 1,026,657 | $ | 1,015,564 |
(1)Consumer commitments related to the business HFS countries under sales agreements are reflected in their original categories until the respective sales are completed.
(2)Other commitments and contingencies include commitments to purchase certain debt and equity securities.
Other Commitments
As a Federal Reserve member bank, Citi is required to subscribe to half of a certain amount of shares issued by its Federal Reserve District Bank. As of September 30, 2023 and December 31, 2022, Citi holds shares with a carrying value of $4.5 billion, with the remaining half subject to call by the Federal Reserve District Bank Board.
In the normal course of business, Citi enters into reverse repurchase and securities borrowing agreements, as well as repurchase and securities lending agreements, which settle at a future date. At September 30, 2023 and December 31, 2022, Citi had approximately $143.9 billion and $111.6 billion of unsettled reverse repurchase and securities borrowing agreements, and approximately $108.7 billion and $37.3 billion of unsettled repurchase and securities lending agreements, respectively. See Note 10 for a further discussion of securities purchased under agreements to resell and securities borrowed, and securities sold under agreements to repurchase and securities loaned, including the Company’s policy for offsetting repurchase and reverse repurchase agreements.
These amounts are not included in the table above.
Restricted Cash
Citigroup defines restricted cash (as cash subject to withdrawal restrictions) to include cash deposited with central banks that must be maintained to meet minimum regulatory requirements, and cash set aside for the benefit of customers or for other purposes such as compensating balance arrangements or debt retirement. Restricted cash may include minimum reserve requirements at certain central banks and cash segregated to satisfy rules regarding the protection of customer assets as required by Citigroup broker-dealers’ primary regulators, including the SEC, the Commodity Futures Trading Commission and the United Kingdom’s Prudential Regulation Authority.
Restricted cash is included on the Consolidated Balance Sheet within the following balance sheet lines:
| In millions of dollars | September 30,<br>2023 | December 31, 2022 | ||
|---|---|---|---|---|
| Cash and due from banks | $ | 4,150 | $ | 4,820 |
| Deposits with banks, net of allowance | 14,786 | 12,156 | ||
| Total | $ | 18,936 | $ | 16,976 |
In addition to the restricted cash amounts presented
above, at September 30, 2023 and December 31, 2022,
approximately $3.5 billion and $1.8 billion, respectively, was
held at the Deposit Insurance Agency and was subject to restrictions imposed by the Russian government. These restricted amounts are reported within Other assets on the Consolidated Balance Sheet.
25. LEASES
The Company’s operating leases, where Citi is a lessee, include real estate, such as office space and branches, and various types of equipment. These leases may contain renewal and extension options and early termination features; however, these options do not impact the lease term unless the Company is reasonably certain that it will exercise options. These leases have a weighted-average remaining lease term of approximately six years as of September 30, 2023.
For additional information regarding Citi’s leases, see Notes 1 and 28 to the Consolidated Financial Statements in Citi’s 2022 Form 10-K.
The following table presents information on the right-of-use (ROU) asset and lease liabilities included in Premises and equipment and Other liabilities, respectively:
| In millions of dollars | September 30,<br>2023 | December 31,<br>2022 | ||
|---|---|---|---|---|
| ROU asset | $ | 2,787 | $ | 2,892 |
| Lease liability | 2,974 | 3,076 |
The Company recognizes fixed lease costs on a straight-line basis throughout the lease term in the Consolidated Statement of Income. In addition, variable lease costs are recognized in the period in which the obligation for those payments is incurred.
26. CONTINGENCIES
The following information supplements and amends, as applicable, the disclosure in Note 26 to the Consolidated Financial Statements in Citigroup’s Second Quarter of 2023 Form 10-Q, Note 25 to the Consolidated Financial Statements in Citi’s First Quarter of 2023 Form 10-Q and in Note 29 to the Consolidated Financial Statements in Citi’s 2022 Form 10-K. For purposes of this Note, Citigroup, its affiliates and subsidiaries and current and former officers, directors, and employees, are sometimes collectively referred to as Citigroup and Related Parties.
In accordance with ASC 450, Citigroup establishes accruals for contingencies, including any litigation, regulatory, or tax matters disclosed herein, when Citigroup believes it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. Once established, accruals are adjusted from time to time, as appropriate, in light of additional information. The amount of loss ultimately incurred in relation to those matters may be substantially higher or lower than the amounts accrued for those matters. With respect to previously incurred loss contingencies for which recovery is expected, Citi applies loss recovery accounting when disputes and uncertainties affecting recognition are resolved.
If Citigroup has not accrued for a matter because the matter does not meet the criteria for accrual (as set forth above), or Citigroup believes an exposure to loss exists in excess of the amount accrued for a particular matter, in each case assuming a material loss is reasonably possible but not probable, Citigroup discloses the matter. In addition, for such matters, Citigroup discloses an estimate of the aggregate reasonably possible loss or range of loss in excess of the amounts accrued for those matters for which an estimate can be made. At September 30, 2023, Citigroup estimates that the reasonably possible unaccrued loss for these matters ranges up to approximately $1.3 billion in the aggregate.
As available information changes, the matters for which Citigroup is able to estimate will change, and the estimates themselves will change. In addition, while many estimates presented in financial statements and other financial disclosures involve significant judgment and may be subject to significant uncertainty, estimates of the range of reasonably possible loss arising from litigation, regulatory, tax, or other matters are subject to particular uncertainties. For example, at the time of making an estimate, Citigroup may only have preliminary or incomplete information about the facts underlying the claim; its assumptions about the future rulings of the court or other tribunal on significant issues, or the behavior and incentives of adverse parties, regulators, or tax authorities may prove to be wrong; and the outcomes it is attempting to predict are often not amenable to the use of statistical or other quantitative analytical tools. In addition, from time to time an outcome may occur that Citigroup had not accounted for in its estimates because it had deemed such an outcome to be remote. For all these reasons, the amount of loss in excess of amounts accrued in relation to matters for which an estimate has been made could be substantially higher or lower than the range of loss included in the estimate.
Subject to the foregoing, it is the opinion of Citigroup’s management, based on current knowledge and after taking into account its current accruals, that the eventual outcome of all matters described in this Note would not be likely to have a material adverse effect on the consolidated financial condition of Citigroup. Nonetheless, given the substantial or indeterminate amounts sought in certain of these matters and the inherent unpredictability of such matters, an adverse outcome in certain of these matters could, from time to time, have a material adverse effect on Citigroup’s consolidated results of operations or cash flows in particular quarterly or annual periods.
For further information on ASC 450 and Citigroup’s accounting and disclosure framework for contingencies, including for any litigation, regulatory, and tax matters disclosed herein, see Note 29 to the Consolidated Financial Statements in Citi’s 2022 Form 10-K.
FDIC Special Assessment
On May 11, 2023, the FDIC issued a notice of proposed
rulemaking that would implement a special assessment—
primarily upon large banks—to recover the uninsured deposit losses from the failures of Silicon Valley Bank and Signature Bank. The FDIC estimated that of the cost of the failures, approximately $15.8 billion was attributable to the protection of uninsured depositors, an estimate that will be periodically adjusted. The FDIC has proposed collecting the special assessment at an annual rate of approximately 12.5 basis points of uninsured U.S. deposits over eight quarterly assessment periods beginning in 2024. There is sufficient uncertainty around the final FDIC regulation that would impact both the timing and amount. If the final rule for the FDIC special assessment, which is expected before the end of 2023, is enacted as proposed, Citi is likely to incur up to a $1.5 billion pretax charge, impacting operating expenses. This amount is not included in the reasonably possible loss estimate above.
Interbank Offered Rates-Related Litigation and Other Matters
On October 10, 2023, in MCCARTHY, ET AL. v. INTERCONTINENTAL EXCHANGE, INC., ET AL., the United States District Court for the Northern District of California granted defendants’ motion to dismiss with prejudice for all claims against Citigroup, Citibank, and CGMI. Additional information concerning this action is publicly available in court filings under the docket number 20-CV-5832 (N.D. Cal.) (Donato, J.).
Interest Rate and Credit Default Swap Matters
Antitrust and Other Litigation: On August 14, 2023, the court granted defendants’ motion to dismiss with prejudice for all claims against Citigroup, Citibank, CGMI, and CGML in TERA GROUP, INC., ET AL. v. CITIGROUP, INC., ET AL. Additional information concerning this action is publicly available in court filings under the docket number 17-CV-4302 (S.D.N.Y.) (Sullivan, J.).
Variable Rate Demand Obligation Litigations
On September 21, 2023, the court granted plaintiffs’ motion for class certification in THE CITY OF PHILADELPHIA, MAYOR AND CITY COUNCIL OF BALTIMORE, THE BOARD OF DIRECTORS OF THE SAN DIEGO ASSOCIATION OF GOVERNMENTS, ACTING AS THE SAN DIEGO COUNTY REGIONAL TRANSPORTATION COMMISSION v. BANK OF AMERICA CORP., ET AL., certifying both an antitrust class and a breach-of-contract subclass. On October 5, 2023, defendants filed a Rule 23(f) petition seeking leave to appeal the certification ruling. Additional information concerning this action is publicly available in court filings under the docket numbers 19-CV-1608 (S.D.N.Y.) (Furman, J.) and 23-7328 (2d Cir.).
Since April 2018, Citigroup and certain of its affiliates, including Citibank and CGMI, have been named in state court qui tam lawsuits in which Edelweiss Fund, LLC alleges that Citi and other financial institutions defrauded certain state municipal variable rate demand obligation (“VRDO”) issuers in connection with resetting VRDO interest rates. Filed under each state’s respective false claims act, these actions are pending in state courts in California, Illinois, New Jersey, and New York, and are captioned STATE OF CALIFORNIA EX REL. EDELWEISS FUND v. JP MORGAN CHASE & CO., ET AL., STATE OF ILLINOIS EX REL. EDELWEISS FUND v. JP MORGAN CHASE & CO., ET AL., STATE OF NEW JERSEY EX REL. EDELWEISS FUND v. JP MORGAN CHASE & CO., ET AL., and STATE OF NEW YORK EX REL. EDELWEISS FUND v. JP MORGAN CHASE & CO., ET AL., respectively. Additional information concerning these actions is publicly available in court filings under the docket numbers 2017 L 000289 (Ill. Cir. Ct.) (Donnelly, J.), 100559/2014 (N.Y. Sup. Ct.) (Borrok, J.), L-885-15 (N.J. Super. Ct.) (Hurd, J.), 14-323-BLS1 (Mass. Super. Ct.) (Kaplan, J.), SJC-12973 (Mass. Sup. Ct.), CGC-14-540777 (Cal. Super. Ct.) (Schulman, J.), A163264 (Cal. Ct. App.), and S280347 (Cal. Sup. Ct.).
Settlement Payments
Payments required in any settlement agreements described above have been made or are covered by existing litigation or other accruals.
27. SUBSIDIARY GUARANTEES
Citigroup Inc. has fully and unconditionally guaranteed the payments due on debt securities issued by Citigroup Global Markets Holdings Inc. (CGMHI), a wholly owned subsidiary, under the Senior Debt Indenture dated as of March 8, 2016, between CGMHI, Citigroup Inc. and The Bank of New York Mellon, as trustee. In addition, Citigroup Capital III and Citigroup Capital XIII (collectively, the Capital Trusts), each of which is a wholly owned finance subsidiary of Citigroup Inc., have issued trust preferred securities. Citigroup Inc. has guaranteed the payments due on the trust preferred securities
to the extent that the Capital Trusts have insufficient available funds to make payments on the trust preferred securities. The guarantee, together with Citigroup Inc.’s other obligations with respect to the trust preferred securities, effectively provides a full and unconditional guarantee of amounts due on the trust preferred securities (see Note 17 for additional information). No other subsidiary of Citigroup Inc. guarantees the debt securities issued by CGMHI or the trust preferred securities issued by the Capital Trusts.
Summarized financial information for Citigroup Inc. and CGMHI is presented in the tables below:
SUMMARIZED INCOME STATEMENT
| Nine Months Ended | ||||
|---|---|---|---|---|
| September 30, 2023 | ||||
| In millions of dollars | Citigroup parent company | CGMHI | ||
| Total revenues, net of interest expense | $ | 10,080 | $ | 8,494 |
| Total operating expenses | 138 | 8,856 | ||
| Provision for credit losses | — | 29 | ||
| Equity in undistributed income of subsidiaries | 343 | — | ||
| Income (loss) from continuing operations before income taxes | $ | 10,285 | $ | (391) |
| Provision (benefit) for income taxes | (782) | 5 | ||
| Net income | $ | 11,067 | $ | (396) |
SUMMARIZED BALANCE SHEET
| September 30, 2023 | December 31, 2022 | |||||||
|---|---|---|---|---|---|---|---|---|
| In millions of dollars | Citigroup parent company | CGMHI | Citigroup parent company | CGMHI | ||||
| Cash and deposits with banks | $ | 3,018 | $ | 20,385 | $ | 3,015 | $ | 27,122 |
| Securities borrowed and purchased under resale agreements | — | 271,275 | — | 306,273 | ||||
| Trading account assets | 557 | 260,593 | 306 | 209,957 | ||||
| Advances to subsidiaries | 151,911 | — | 146,843 | — | ||||
| Investments in subsidiary bank holding company | 175,310 | — | 172,721 | — | ||||
| Investments in non-bank subsidiaries | 47,644 | — | 48,295 | — | ||||
| Other assets | 14,766 | 179,700 | 13,788 | 163,819 | ||||
| Total assets | $ | 393,206 | $ | 731,953 | $ | 384,968 | $ | 707,171 |
| Securities loaned and sold under agreements to repurchase | $ | — | $ | 294,354 | $ | — | $ | 245,916 |
| Trading account liabilities | 205 | 104,799 | 604 | 115,929 | ||||
| Short-term borrowings | 1,500 | 25,929 | — | 43,850 | ||||
| Long-term debt | 160,571 | 184,859 | 166,257 | 172,068 | ||||
| Advances from subsidiaries | 17,803 | — | 14,562 | — | ||||
| Other liabilities | 3,624 | 83,858 | 2,356 | 90,570 | ||||
| Stockholders’ equity | 209,503 | 38,154 | 201,189 | 38,838 | ||||
| Total liabilities and equity | $ | 393,206 | $ | 731,953 | $ | 384,968 | $ | 707,171 |
UNREGISTERED SALES OF EQUITY SECURITIES, REPURCHASES OF EQUITY SECURITIES AND DIVIDENDS
Unregistered Sales of Equity Securities
None.
Equity Security Repurchases
All large banks, including Citi, are subject to limitations on capital distributions in the event of a breach of any regulatory capital buffers, including the Stress Capital Buffer, with the degree of such restrictions based on the extent to which the buffers are breached. For additional information, see “Capital Resources—Regulatory Capital Buffers” and “Risk Factors—Strategic Risks” in Citi’s 2022 Form 10-K.
The following table summarizes Citi’s common share repurchases for the third quarter of 2023:
| In millions, except per share amounts | Total shares purchased | Average <br>price paid <br>per share | |
|---|---|---|---|
| July 2023 | |||
| Open market repurchases(1) | — | $ | — |
| Employee transactions(2) | — | — | |
| August 2023 | |||
| Open market repurchases(1) | — | — | |
| Employee transactions(2) | — | — | |
| September 2023 | |||
| Open market repurchases(1) | 11.95 | 41.82 | |
| Employee transactions(2) | — | — | |
| Total for 3Q23 | 11.95 | $ | 41.82 |
(1) Repurchases not made pursuant to any publicly announced plan or program.
(2) During the third quarter, pursuant to Citigroup’s Board of Directors’ authorization, Citi withheld an insignificant number of shares of common stock, added to treasury stock, related to activity on employee stock programs to satisfy the employee tax requirements.
As previously announced, Citi will continue to assess common share repurchases on a quarter-by-quarter basis given uncertainty regarding regulatory capital requirements.
Dividends
Citi paid common dividends of $0.53 per share for the third quarter of 2023, and on October 19, 2023, declared common dividends of $0.53 per share for the fourth quarter of 2023. Citi intends to maintain a quarterly common dividend of at least $0.53 per share, subject to financial and macroeconomic conditions as well as its Board of Directors’ approval.
As discussed above, Citi’s ability to pay common stock dividends is subject to limitations on capital distributions in the event of a breach of any regulatory capital buffers, including the Stress Capital Buffer, with the degree of such restrictions based on the extent to which the buffers are breached. For additional information, see “Capital Resources—Regulatory Capital Buffers” and “Risk Factors—Strategic Risks” in Citi’s 2022 Form 10-K.
Any dividend on Citi’s outstanding common stock would also need to be in compliance with Citi’s obligations on its outstanding preferred stock.
On October 19, 2023, Citi declared preferred dividends of approximately $300 million for the fourth quarter of 2023.
For information on the ability of Citigroup’s subsidiary depository institutions to pay dividends, see Note 19 to the Consolidated Financial Statements in Citi’s 2022 Form 10-K.
OTHER INFORMATION
Insider Trading Arrangements
During the third quarter of 2023, no director or executive officer of Citi adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangement (each, as defined in Item 408 of Regulation S-K).
Amendments to By-laws
On November 1, 2023, Citi’s Board of Directors amended Citi’s By-laws (the By-laws), effective as of such date, to enhance procedural mechanics and disclosure requirements in connection with shareholder nominations of directors (or proposals of business other than nominations at an annual meeting not brought pursuant to SEC Rule 14a-8), including by: (i) amending Section 11 of Article III to require a stockholder desiring to nominate directors to make a representation confirming that such stockholder will, or is part of a group that will, solicit proxies in support of director nominees other than Citi’s nominees in accordance with SEC Rule 14a-19, or whether it will otherwise solicit proxies in support of director nominees (or a proposal, in the case of business other than nominations at an annual meeting); (ii) amending Section 11 of Article III to require a stockholder desiring to nominate directors (or propose business other than nominations at an annual meeting) to make a representation that it will provide Citi documents demonstrating that it has delivered a proxy statement and form to the holders of a percentage of Citi’s stock consistent with the stockholder’s representation to Citi; (iii) amending Section 13 of Article III to require nominating or proposing stockholders who are entities to satisfy certain informational requirements with respect to the individuals who directly or indirectly control (but are not passive investors in) such entities; (iv) amending Section 11 of Article III to require that any stockholder desiring to nominate directors at a special meeting for director elections must comply with the advance notice information requirements applicable at annual meetings; (v) amending Section 11 of Article III to require that a stockholder seeking to propose business other than nominations at an annual meeting must include the text of any proposed resolution or by-law amendment; (vi) amending Sections 11 and 12 of Article III to provide that Citi has ten days to provide the nominee questionnaire to a stockholder upon request, which would require a stockholder to approach Citi with such a request more than ten days prior to the end of the applicable nomination window to ensure the nomination is timely submitted; (vii) amending Section 11 to Article III to clarify that, with the adoption of SEC Rule 14a-19, Citi’s proxy access by-law is no longer the exclusive means for stockholder nominees to be included on Citi’s proxy card; (viii) amending Section 11 of Article III to prohibit a stockholder soliciting proxies from using the white-colored proxy card; and (ix) amending Section 11 of Article III to clarify that a nominating or proposing stockholder’s failure to provide the required information or comply with the applicable By-law requirements (including compliance with the applicable SEC rules) will result in a stockholder’s nomination or proposal of other business being disregarded. The amendments to the By-
laws also incorporated certain other modifications that provide clarification and consistency.
The foregoing description of the amendments to the By-laws does not purport to be complete and is qualified in its entirety by the text of the By-laws, as amended, a copy of which is attached as Exhibit 3.02 to this Quarterly Report on Form 10-Q and is incorporated herein by reference.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 3rd day of November, 2023.
CITIGROUP INC.
(Registrant)
By /s/ Mark A. L. Mason
Mark A. L. Mason
Chief Financial Officer
(Principal Financial Officer)
By /s/ Johnbull E. Okpara
Johnbull E. Okpara
Controller and Chief Accounting Officer
(Principal Accounting Officer)
GLOSSARY OF TERMS AND ACRONYMS
The following is a list of terms and acronyms that are used in this Quarterly Report on Form 10-Q and other Citigroup SEC filings and presentations.
* Denotes a Citi metric
2022 Form 10-K: Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC.
90+ days past due delinquency rate*: Represents consumer loans that are past due by 90 or more days, divided by that period’s total EOP loans.
ABS: Asset-backed securities
ACL: Allowance for credit losses, which is composed of the allowance for credit losses on loans (ACLL), allowance for credit losses on unfunded lending commitments (ACLUC), allowance for credit losses on HTM securities and allowance for credit losses on other assets.
ACLL: Allowance for credit losses on loans
ACLUC: Allowance for credit losses on unfunded lending commitments
Advanced Approaches: The Advanced Approaches capital framework, established through Basel III rules by the FRB, requires certain banking organizations to use an internal ratings-based approach and other methodologies to calculate risk-based capital requirements for credit risk and advanced measurement approaches to calculate risk-based capital requirements for operational risk.
AFS: Available-for-sale
ALCO: Asset Liability Committee
Amortized cost: Amount at which a financing receivable or investment is originated or acquired, adjusted for accretion or amortization of premium, discount, and net deferred fees or costs, collection of cash, charge-offs, foreign exchange, and fair value hedge accounting adjustments. For AFS securities, amortized cost is also reduced by any impairment losses recognized in earnings. Amortized cost is not reduced by the allowance for credit losses, except where explicitly presented net.
AOCI: Accumulated other comprehensive income (loss)
ARM: Adjustable rate mortgage(s)
ASC: Accounting Standards Codification under GAAP issued by the FASB.
Asia Consumer: Asia Consumer Banking
ASU: Accounting Standards Update under GAAP issued by the FASB.
AUC: Assets under custody
AUM: Assets under management. Represent assets managed on behalf of Citi’s clients.
Available liquidity resources*: Resources available at the balance sheet date to support Citi’s client and business needs, including HQLA assets; additional unencumbered securities,
including excess liquidity held at bank entities that is non-transferable to other entities within Citigroup; and available assets not already accounted for within Citi’s HQLA to support Federal Home Loan Bank (FHLB) and Federal Reserve Bank discount window borrowing capacity.
Basel III: Liquidity and capital rules adopted by the FRB based on an internationally agreed set of measures developed by the Basel Committee on Banking Supervision.
Beneficial interests issued by consolidated VIEs: Represents the interest of third-party holders of debt, equity securities or other obligations, issued by VIEs that Citi consolidates.
Benefit obligation: Refers to the projected benefit obligation for pension plans and the accumulated postretirement benefit obligation for OPEB plans.
BHC: Bank holding company
Board: Citigroup’s Board of Directors
Book value per share*: EOP common equity divided by EOP common shares outstanding.
Bps: Basis points. One basis point equals 1/100th of one percent.
Branded cards: Citi’s branded cards business with a portfolio of proprietary cards (Cash, Rewards and Value) and co-branded cards (including, among others, American Airlines and Costco).
Build: A net increase in ACL through the provision for credit losses.
Cards: Citi’s credit cards’ businesses or activities.
CCAR: Comprehensive Capital Analysis and Review
CCO: Chief Compliance Officer
CDS: Credit default swaps
CECL: Current expected credit losses
CEO: Chief Executive Officer
CET1 Capital: Common Equity Tier 1 Capital. See “Capital Resources—Components of Citigroup Capital” above for the components of CET1.
CET1 Capital ratio*: Common Equity Tier 1 Capital ratio. A primary regulatory capital ratio representing end-of-period CET1 Capital divided by total risk-weighted assets.
CFO: Chief Financial Officer
CFTC: Commodity Futures Trading Commission
CGMHI: Citigroup Global Markets Holdings Inc.
CGMI: Citigroup Global Markets Inc.
CGML: Citigroup Global Markets Limited
Citi: Citigroup Inc.
Citibank or CBNA: Citibank, N.A. (National Association)
Classifiably managed: Loans primarily evaluated for credit risk based on internal risk rating classification.
Client assets: Represent assets under management as well as custody, brokerage, administration and deposit accounts.
CLO: Collateralized loan obligations
Coincident NCL coverage ratio: A credit metric, representing the ACLL at period end divided by (the most recent quarter’s NCLs divided by 3). This ratio is expressed in months of coverage.
Collateral dependent: A loan is considered collateral dependent when repayment of the loan is expected to be provided substantially through the operation or sale of the collateral when the borrower is experiencing financial difficulty, including when foreclosure is deemed probable based on borrower delinquency.
Commercial cards: Provides a wide range of payment services to corporate and public sector clients worldwide through commercial card products. Services include procurement, corporate travel and entertainment, expense management services and business-to-business payment solutions.
Consent orders: In October 2020, Citigroup and Citibank entered into consent orders with the Federal Reserve and OCC that require Citigroup and Citibank to make improvements in various aspects of enterprise-wide risk management, compliance, data quality management and governance and internal controls.
CRE: Commercial real estate
Credit card spend volume*: Dollar amount of card customers’ gross purchases. Also known as purchase sales.
Credit cycle: A period of time over which credit quality improves, deteriorates and then improves again (or vice versa). The duration of a credit cycle can vary from a couple of years to several years.
Credit derivatives: Financial instruments whose value is derived from the credit risk associated with the debt of a third-party issuer (the reference entity), which allow one party (the protection purchaser) to transfer that risk to another party (the protection seller).
Critical Audit Matters: Audit matters communicated by KPMG to Citi’s Audit Committee of the Board of Directors, relating to accounts or disclosures that are material to the Consolidated Financial Statements and involved especially challenging, subjective or complex judgments. See “Report of Independent Registered Public Accounting Firm” in Citi’s annual reports on Form 10-K.
Criticized: Criticized loans, lending-related commitments and derivative receivables that are classified as special mention, substandard and doubtful categories for regulatory purposes.
CRO: Chief Risk Officer
CTA: Cumulative translation adjustment (also known as currency translation adjustment). A separate component of
equity within AOCI reported net of tax. For Citi, represents the impact of translating non-USD balance sheet items into USD each period. The CTA amount in EOP AOCI is a cumulative balance, net of tax.
CVA: Credit valuation adjustment
Delinquency managed: Loans primarily evaluated for credit risk based on delinquencies, FICO scores and the value of underlying collateral.
Divestiture-related impacts: Citi’s results excluding divestiture-related impacts represent as reported, or GAAP, financial results adjusted for items that are incurred and recognized, which are wholly and necessarily a consequence of actions taken to sell (including through a public offering), dispose of or wind down business activities associated with Citi’s announced 14 exit markets.
Dividend payout ratio*: Represents dividends declared per common share as a percentage of net income per diluted share.
Dodd-Frank Act: Wall Street Reform and Consumer Protection Act
DPD: Days past due
DSA: Deferred stock awards
DTA: Deferred tax asset
DVA: Debt valuation adjustment
EC: European Commission
Efficiency ratio*: A ratio signifying how much of a dollar in expenses (as a percentage) it takes to generate one dollar in revenue. Represents total operating expenses divided by total revenues, net.
EMEA: Europe, Middle East and Africa
EOP: End-of-period
EPS*: Earnings per share
ERISA: Employee Retirement Income Security Act of 1974
ESG: Environmental, Social and Governance
ETR: Effective tax rate
EU: European Union
Fannie Mae: Federal National Mortgage Association
FASB: Financial Accounting Standards Board
FCA: Financial Conduct Authority
FDIC: Federal Deposit Insurance Corporation
Federal Reserve: The Board of the Governors of the Federal Reserve System
FFIEC: Federal Financial Institutions Examination Council
FHA: Federal Housing Administration
FHLB: Federal Home Loan Bank
FICO: Fair Issac Corporation
FICO score: A measure of consumer credit risk provided by credit bureaus, typically produced from statistical models by
Fair Isaac Corporation utilizing data collected by the credit bureaus.
FINRA: Financial Industry Regulatory Authority
Firm: Citigroup Inc.
FRB: Federal Reserve Board
FRBNY: Federal Reserve Bank of New York
Freddie Mac: Federal Home Loan Mortgage Corporation
FTCs: Foreign tax credit carry-forwards
FVA: Funding valuation adjustment
FX: Foreign exchange
FX translation: The impact of converting non-U.S.-dollar currencies into U.S. dollars.
G7: Group of Seven nations. Countries in the G7 are Canada, France, Germany, Italy, Japan, the U.K. and the U.S.
GAAP or U.S. GAAP: Generally accepted accounting principles in the United States of America.
Ginnie Mae: Government National Mortgage Association
Global Wealth: Global Wealth Management
GSIB: Global systemically important banks
HELOC: Home equity line of credit
HFI loans: Loans that are held-for-investment (i.e., excludes loans held-for-sale).
HFS: Held-for-sale
HQLA: High-quality liquid assets. Consist of cash and certain high-quality liquid securities as defined in the LCR rule.
HTM: Held-to-maturity
Hyperinflation: Extreme economic inflation with prices rising at a very high rate in a very short time. Under U.S. GAAP, entities operating in a hyperinflationary economy need to change their functional currency to the U.S. dollar. Once the change is made, the CTA balance is frozen.
IBOR: Interbank Offered Rate
ICG: Institutional Clients Group
ICRM: Independent Compliance Risk Management
IPO: Initial public offering
ISDA: International Swaps and Derivatives Association
KM: Key financial and non-financial metric used by management when evaluating consolidated and/or individual business results.
KPMG LLP: Citi’s Independent Registered Public Accounting Firm.
LATAM: Latin America, which for Citi, includes Mexico.
LCR: Liquidity Coverage ratio. Represents HQLA divided by net outflows in the period.
LDA: Loss Distribution Approach
LF: Legacy Franchises
LGD: Loss given default
LIBOR: London Interbank Offered Rate
LLC: Limited Liability Company
LTD: Long-term debt
LTV: Loan-to-value. For residential real estate loans, the relationship, expressed as a percentage, between the principal amount of a loan and the appraised value of the collateral (i.e., residential real estate) securing the loan.
Master netting agreement: A single agreement with a counterparty that permits multiple transactions governed by that agreement to be terminated or accelerated and settled through a single payment in a single currency in the event of a default (e.g., bankruptcy, failure to make a required payment or securities transfer or deliver collateral or margin when due).
MBS: Mortgage-backed securities
MCA: Manager’s control assessment
MD&A: Management’s discussion and analysis
Measurement alternative: Measures equity securities without readily determinable fair values at cost less impairment (if any), plus or minus observable price changes from an identical or similar investment of the same issuer.
Mexico Consumer: Mexico Consumer Banking
Mexico Consumer/SBMM: Mexico Consumer Banking and Small Business and Middle-Market Banking
Mexico SBMM: Mexico Small Business and Middle-Market Banking
Moody’s: Moody’s Investors Service
MSRs: Mortgage servicing rights
N/A: Data is not applicable or available for the period presented.
NAA: Non-accrual assets. Consists of non-accrual loans and OREO.
NAL: Non-accrual loans. Loans for which interest income is not recognized on an accrual basis. Loans (other than credit card loans and certain consumer loans insured by U.S. government-sponsored agencies) are placed on non-accrual status when full payment of principal and interest is not expected, regardless of delinquency status, or when principal and interest have been in default for a period of 90 days or more unless the loan is both well secured and in the process of collection. Collateral-dependent loans are typically maintained on non-accrual status.
NAV: Net asset value
NCL(s): Net credit losses. Represents gross credit losses, less gross credit recoveries.
NCL ratio*: Represents net credit losses (recoveries) (annualized), divided by average loans for the reporting period.
Net capital rule: Rule 15c3-1 under the Securities Exchange Act of 1934.
Net interchange income: Includes the following components:
• Interchange revenue: Fees earned from merchants based on Citi’s credit and debit card customers’ sales transactions.
• Reward costs: The cost to Citi for points earned by cardholders enrolled in credit card rewards programs generally tied to sales transactions.
• Partner payments: Payments to co-brand credit card partners based on the cost of loyalty program rewards earned by cardholders on credit card transactions.
NII: Net interest income. Represents total interest revenue less total interest expenses.
NIM*: Net interest margin expressed as a yield percentage, calculated as annualized net interest income divided by average interest-earning assets for the period.
NIR: Non-interest revenues
NM: Not meaningful
Noncontrolling interests: The portion of an investment that has been consolidated by Citi that is not 100% owned by Citi.
Non-GAAP financial measure: Management uses these financial measures because it believes they provide information to enable investors to understand the underlying operational performance and trends of Citi and its businesses.
NSFR: Net stable funding ratio
O/S: Outstanding
OCC: Office of the Comptroller of the Currency
OCI: Other comprehensive income (loss)
OREO: Other real estate owned
OTTI: Other-than-temporary impairment
Over-the-counter cleared (OTC-cleared) derivatives: Derivative contracts that are negotiated and executed bilaterally, but subsequently settled via a central clearing house, such that each derivative counterparty is only exposed to the default of that clearing house.
Over-the-counter (OTC) derivatives: Derivative contracts that are negotiated, executed and settled bilaterally between two derivative counterparties, where one or both counterparties is a derivatives dealer.
Parent company: Citigroup Inc.
Participating securities: Represents unvested share-based compensation awards containing nonforfeitable rights to dividends or dividend equivalents (collectively, “dividends”), which are included in the earnings per share calculation using the two-class method. Citi grants RSUs to certain employees under its share-based compensation programs, which entitle the recipients to receive non-forfeitable dividends during the vesting period on a basis equivalent to the dividends paid to holders of common stock. These unvested awards meet the definition of participating securities. Under the two-class method for calculating EPS, all earnings (distributed and undistributed) are allocated to each class of common stock and participating securities, based on their respective rights to receive dividends.
PBWM: Personal Banking and Wealth Management
PD: Probability of default
Principal transactions revenue: Primarily trading-related revenues predominantly generated by the ICG businesses. See Note 6.
Provision for credit losses: Composed of the provision for credit losses on loans, provision for credit losses on HTM investments, provision for credit losses on other assets and provision for credit losses on unfunded lending commitments.
Provisions: Provisions for credit losses and for benefits and claims.
PSUs: Performance share units
Purchased credit-deteriorated: Purchased credit-deteriorated assets are financial assets that as of the date of acquisition have experienced a more-than-insignificant deterioration in credit quality since origination, as determined by the Company.
R&S forecast period: Reasonable and supportable period over which Citi forecasts future macroeconomic conditions for CECL purposes.
Real GDP: Real gross domestic product is the inflation-adjusted value of the goods and services produced by labor and property located in a country.
Regulatory VAR: Daily aggregated VAR calculated in accordance with regulatory rules.
REITs: Real estate investment trusts
Release: A net decrease in ACL through the provision for credit losses.
Reported basis: Financial statements prepared under U.S. GAAP.
Results of operations that exclude certain impacts from gains or losses on sale, or one-time charges*: Represents GAAP items, excluding the impact of gains or losses on sales, or one-time charges (e.g., the loss on sale related to the sale of Citi’s consumer banking business in Australia).
Results of operations that exclude the impact of FX translation*: Represents GAAP items, excluding the impact of FX translation, whereby the prior periods’ foreign currency balances are translated into U.S. dollars at the current period’s conversion rates (also known as constant dollar). GAAP measures excluding the impact of FX translation are non-GAAP financial measures.
Retail services: Citi’s U.S. retail services cards business with a portfolio of co-brand and private label relationships (including, among others, The Home Depot, Best Buy, Sears and Macy’s).
RMI: A non-partisan, non-profit organization that works to transform global energy systems across the real economy. Citi joined the RMI Center for Climate-Aligned Finance in 2021.
ROA*: Return on assets. Represents net income (annualized), divided by average assets for the period.
ROCE*: Return on Common Equity. Represents net income less preferred dividends (both annualized), divided by average common equity for the period.
ROE: Return on equity. Represents net income less preferred dividends (both annualized), divided by average Citigroup equity for the period.
RoTCE*: Return on tangible common equity. Represents net income less preferred dividends (both annualized), divided by average tangible common equity for the period.
RSU(s): Restricted stock units
RWA: Risk-weighted assets. Basel III establishes two comprehensive approaches for calculating RWA (the Standardized Approach and the Advanced Approaches), which include capital requirements for credit risk, market risk and operational risk for Advanced Approaches. Key differences in the calculation of credit risk RWA between the Standardized and Advanced Approaches are that for Advanced, credit risk RWA is based on risk-sensitive approaches that largely rely on the use of internal credit models and parameters, whereas for Standardized, credit risk RWA is generally based on supervisory risk weightings, which vary primarily by counterparty type and asset class. Market risk RWA is calculated on a generally consistent basis between Basel III Standardized Approach and Basel III Advanced Approaches.
S&P: Standard and Poor’s Global Ratings
SCB: Stress Capital Buffer
SCF: Subscription credit facility. SCFs are revolving credit facilities provided to private equity funds that are secured against the fund’s investors’ capital commitments.
SEC: The U.S. Securities and Exchange Commission
Securities financing agreements: Include resale, repurchase, securities borrowed and securities loaned agreements.
SLR: Supplementary Leverage ratio. Represents Tier 1 Capital divided by Total Leverage Exposure.
SOFR: Secured Overnight Financing Rate
SPEs: Special purpose entities
Standardized Approach: Established through Basel III, the Standardized Approach aligns regulatory capital requirements more closely with the key elements of banking risk by introducing a wider differentiation of risk weights and a wider recognition of credit risk mitigation techniques, while avoiding excessive complexity. Accordingly, the Standardized Approach produces capital ratios more in line with the actual economic risks that banks are facing.
Structured notes: Financial instruments whose cash flows are linked to the movement in one or more indexes, interest rates, foreign exchange rates, commodities prices, prepayment rates or other market variables. The notes typically contain embedded (but not separable or detachable) derivatives. Contractual cash flows for principal, interest or both can vary in amount and timing throughout the life of the note based on non-traditional indexes or non-traditional uses of traditional interest rates or indexes.
Tangible book value per share (TBVPS)*: Represents tangible common equity divided by EOP common shares outstanding.
Tangible common equity (TCE): Represents common stockholders’ equity less goodwill and identifiable intangible assets, other than MSRs.
Taxable equivalent basis: Represents the total revenue, net of interest expense for the business, adjusted for revenue from investments that receive tax credits and the impact of tax-exempt securities. This metric presents results on a level comparable to taxable investments and securities. GAAP measures on taxable equivalent basis, including the metrics derived from these measures, are non-GAAP financial measures.
TDR: Troubled debt restructuring. Prior to January 1, 2023, a TDR was deemed to occur when the Company modified the original terms of a loan agreement by granting a concession to a borrower that was experiencing financial difficulty. Loans with short-term and other insignificant modifications that are not considered concessions were not TDRs. The accounting guidance for TDRs was eliminated with the adoption of ASU 2022-02. See Note 1 for more information.
TLAC: Total loss-absorbing capacity
Total ACL: Allowance for credit losses, which comprises the allowance for credit losses on loans (ACLL), allowance for credit losses on unfunded lending commitments (ACLUC), allowance for credit losses on HTM securities and allowance for credit losses on other assets.
Total payout ratio*: Represents total common dividends declared plus common share repurchases as a percentage of net income available to common shareholders.
Transformation: Citi has embarked on a multiyear transformation, with the target outcome to change Citi’s business and operating models such that they simultaneously strengthen risk and controls and improve Citi’s value to customers, clients and shareholders.
Unaudited: Financial statements and information that have not been subjected to auditing procedures sufficient to permit an independent certified public accountant to express an opinion.
U.S. government agencies: U.S. government agencies include, but are not limited to, agencies such as Ginnie Mae and FHA, and do not include Fannie Mae and Freddie Mac, which are U.S. government-sponsored enterprises (U.S. GSEs). In general, obligations of U.S. government agencies are fully and explicitly guaranteed as to the timely payment of principal and interest by the full faith and credit of the U.S. government in the event of a default.
U.S. Treasury: U.S. Department of the Treasury
VAR: Value at risk. A measure of the dollar amount of potential loss from adverse market moves in an ordinary market environment.
VIEs: Variable interest entities
Wallet: Proportion of fee revenue based on estimates of investment banking fees generated across the industry (i.e., the revenue wallet) from investment banking transactions in M&A, equity and debt underwriting, and loan syndications.
EXHIBIT INDEX
The total amount of securities authorized pursuant to any instrument defining rights of holders of long-term debt of the Company does not exceed 10% of the total assets of the Company and its consolidated subsidiaries. The Company will furnish copies of any such instrument to the SEC upon request.
- Filed herewith.
* Denotes a management contract or compensatory plan or arrangement.
NOTES
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Document
Exhibit 3.01
RESTATED
CERTIFICATE OF INCORPORATION
OF
CITIGROUP INC.
Citigroup Inc., a corporation organized and existing under the laws of the State of Delaware, hereby certifies as follows:
The name of the corporation is Citigroup Inc. (hereinafter the “Corporation”) and the date of filing of its original Certificate of Incorporation with the Delaware Secretary of State is March 8, 1988. The name under which the Corporation filed its Certificate of Incorporation is Commercial Credit Group, Inc. A Restated Certificate of Incorporation, which restated and integrated, but did not further amend, the Certificate of Incorporation as amended or supplemented theretofore, was filed with the Delaware Secretary of State on December 11, 1998.
The text of the Restated Certificate of Incorporation as amended or supplemented heretofore is hereby restated and integrated, but not amended, to read as herein set forth in full and there is no discrepancy between the provisions of the Restated Certificate of Incorporation as so amended or supplemented and the provisions of this Restated Certificate of Incorporation. Following the effective time of this Restated Certificate of Incorporation, all references hereinafter to “Certificate of Incorporation” shall refer to this Restated Certificate of Incorporation.
FIRST: The name of the Corporation is:
Citigroup Inc.
SECOND: The registered office of the Corporation is to be located at the Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, in the county of New Castle, in the State of Delaware. The name of its registered agent at that address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is:
To engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware.
FOURTH: A. The total number of shares of all classes of stock which the Corporation shall have authority to issue is Sixty Billion Thirty Million (60,030,000,000). The total number of shares of Common Stock which the Corporation shall have authority to issue is Sixty Billion (60,000,000,000) shares of Common Stock having a par value of one cent ($.01) per share. The total number of shares of Preferred Stock which the Corporation shall have the authority to issue is Thirty Million (30,000,000) shares having a par value of one dollar ($1.00) per share.
B. The Board of Directors is authorized, subject to limitations prescribed by law and the provisions of this Article FOURTH, to provide for the issuance of the shares of Preferred Stock in series, and by filing a certificate pursuant to the applicable law of the State of Delaware, to establish from time to time the number of shares to be included in each such series, and to fix the designation, powers, preferences and rights of the shares of each such series and the qualifications, limitations or restrictions thereof. The authority of the Board of Directors with respect to each series shall include, but not be limited to, determination of the following:
(i) The number of shares constituting that series and the distinctive designation of that series;
(ii) The dividend rate on the shares of that series, whether dividends shall be cumulative, and, if so, from which date or dates, and the relative rights of priority, if any, of payment of dividends on shares of that series;
(iii) Whether that series shall have voting rights, in addition to the voting rights provided by law, and, if so, the terms of such voting rights;
(iv) Whether that series shall have conversion or exchange privileges, and, if so, the terms and conditions of such conversion or exchange, including provision for adjustment of the conversion or exchange rate in such events as the Board of Directors shall determine;
(v) Whether or not the shares of that series shall be redeemable, and, if so, the terms and conditions of such redemption, including the manner of selecting shares for redemption if less than all shares are to be redeemed, the date or dates upon or after which they shall be redeemable, and the amount per share payable in case of redemption, which amount may vary under different conditions and at different redemption dates;
(vi) Whether that series shall have a sinking fund for the redemption or purchase of shares of that series, and, if so, the terms and amount of such sinking fund;
(vii) The right of the shares of that series to the benefit of conditions and restrictions upon the creation of indebtedness of the Corporation or any subsidiary, upon the issue of any additional stock (including additional shares of such series or any other series) and upon the payment of dividends or the making of other distributions on, and the purchase, redemption or other acquisition by the Corporation or any subsidiary of any outstanding stock of the Corporation;
(viii)The rights of the shares of that series in the event of voluntary or involuntary liquidation, dissolution or winding up of the Corporation, and the relative rights of priority, if any, of payment of shares of that series; and
(ix) Any other relative, participating, optional or other special rights, qualifications, limitations or restrictions of that series.
C. Dividends on outstanding shares of Preferred Stock shall be paid, or declared and set apart for payment, before any dividends shall be paid or declared and set apart for payment on outstanding shares of Common Stock. If upon any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the assets available for distribution to holders of shares of Preferred Stock of all series shall be insufficient to pay such holders the full preferential amount to which they are entitled, then such assets shall be distributed ratably among the shares of all series of Preferred Stock in accordance with the respective preferential amounts (including unpaid cumulative dividends, if any) payable with respect thereto.
D. Shares of any series of Preferred Stock which have been redeemed (whether through the operation of a sinking fund or otherwise) or which, if convertible or exchangeable, have been converted into or exchanged for shares of stock of any other class or classes shall have the status of authorized and unissued shares of Preferred Stock of the same series and may be reissued as a part of the series of which they were originally a part or may be reclassified and reissued as part of a new series of Preferred Stock to be created by resolution or resolutions of the Board of Directors or as part of any other series of Preferred Stock, all subject to the conditions and the restrictions on issuance set forth in the resolution or resolutions adopted by the Board of Directors providing for the issue of any series of Preferred Stock.
E. Subject to the provisions of any applicable law or except as otherwise provided by the resolution or resolutions providing for the issue of any series of Preferred Stock, the holders of outstanding shares of Common Stock shall exclusively possess voting power for the election of directors and for all other purposes; each holder of record of shares of Common Stock being entitled to one vote for each share of Common Stock standing in his name on the books of the Corporation; provided, however, that, except as otherwise required by law, holders of Common Stock shall not be entitled to vote on any amendment to this Certificate of Incorporation (including any certificate relating to shares of Preferred Stock contemplated or authorized by Section B or Section J of this Article FOURTH) that relates solely to the terms of one or more outstanding series of Preferred Stock if the holders of such affected series are entitled, either separately or together as a class with the holders of one or more other such series, to vote thereon pursuant to this Restated Certificate of Incorporation (including any certificate relating to shares of Preferred Stock contemplated or authorized by Section B or Section J of this Article FOURTH).
F. Except as otherwise provided by the resolution or resolutions providing for the issue of any series of Preferred Stock, after payment shall have been made to the holders of Preferred Stock of the full amount of dividends to which they shall be entitled pursuant to the resolution or resolutions providing for the issue of any series of Preferred Stock, the holders of Common Stock shall be entitled, to the exclusion of the holders of Preferred Stock of any and all series, to receive such dividends as from time to time may be declared by the Board of Directors.
G. Except as otherwise provided by the resolution or resolutions providing for the issue of any series of Preferred Stock, in the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, after payment shall have been made to the holders of Preferred Stock of the full amount to which they shall be entitled pursuant to the resolution or resolutions providing for the issue of any series of Preferred Stock, the
holders of Common Stock shall be entitled, to the exclusion of the holders of Preferred Stock of any and all series, to share ratably according to the number of shares of Common Stock held by them, in all remaining assets of the Corporation available for distribution.
H. The issuance of any shares of Common Stock or Preferred Stock authorized hereunder and any other actions permitted to be taken by the Board of Directors pursuant to this Article FOURTH must be authorized by the affirmative vote of at least sixty-six and two-thirds percent (66 2/3%) of the entire Board of Directors or by a committee of the Board of Directors constituted by the affirmative vote of at least sixty-six and two-thirds percent (66 2/3%) of the entire Board of Directors.
I. Notwithstanding any other provision of this Certificate of Incorporation, the affirmative vote of the holders of at least a majority of the voting power of the outstanding shares entitled to vote thereon shall be required to amend, alter, change or repeal, or adopt any provision as part of this Certificate of Incorporation inconsistent with the purpose and intent of, Section B through I of this Article FOURTH.
J. Pursuant to the authority conferred by this Article FOURTH, the following series of Preferred Stock are hereby provided for, with the number of shares to be included in each such series, and the designation, powers, preference and rights, and qualifications, limitations or restrictions thereof fixed as stated and expressed with respect to each such series in the respective exhibit attached hereto as specified below and incorporated herein by reference:
| Exhibit I | 8.125% Non-Cumulative Preferred Stock, Series AA |
|---|---|
| Exhibit II | 8.40% Fixed Rate / Floating Rate Non-Cumulative Preferred Stock, Series E |
| Exhibit III | 8.50% Non-Cumulative Preferred Stock, Series F |
| Exhibit IV | Series R Participating Cumulative Preferred Stock |
| Exhibit V | 6.5% Non-Cumulative Convertible Preferred Stock, Series T |
FIFTH: The Directors need not be elected by written ballot unless and to the extent the By-Laws so require.
SIXTH: The books and records of the Corporation may be kept (subject to any mandatory requirement of law) outside the State of Delaware at such place or places as may be determined from time to time by or pursuant to authority granted by the Board of Directors or by the By-Laws.
SEVENTH: The business and affairs of the Corporation shall be managed by or under the direction of a Board of Directors, the exact number of directors to be determined from time to time by resolution adopted by affirmative vote of a majority of the entire Board of Directors. At each annual meeting, each director shall be elected for a one-year term. A director shall hold office until the annual meeting held the year in which his or her term expires and until his or her successor shall be elected and shall qualify, subject, however, to prior death, resignation, retirement, disqualification or removal from office. Any vacancy on the Board of Directors that results from an increase in the number of directors may be filled by a majority of the Board of Directors then in office, provided that a quorum is present, and any other vacancy occurring in the Board of Directors may be filled by a majority of the directors then in office, even if less than a quorum, or a sole remaining director. Any director elected to fill a vacancy not resulting from an increase in the number of directors shall have the same remaining term as that of his or her predecessor. Notwithstanding the foregoing, whenever the holders of any one or more classes or series of Preferred Stock issued by the Corporation shall have the right, voting separately by class or series, to elect directors at an annual or special meeting of stockholders, the election, term of office, filling of vacancies and other features of such directorships shall be governed by the terms of this Restated Certificate of Incorporation applicable thereto.
EIGHTH: A. In addition to any affirmative vote required by law or this Certificate of Incorporation or the By-Laws of the Corporation, and except as otherwise expressly provided in Section B of this Article EIGHTH, a Business Combination (as hereinafter defined) shall require the affirmative vote of not less than a majority of the votes cast affirmatively and negatively by the holders of Voting Stock (as hereinafter defined), voting together as a single class. Such affirmative vote shall be required notwithstanding the fact that no vote may be required, or that a lesser percentage or separate class vote may be specified, by law or in any agreement with any national securities exchange or otherwise.
B. The provisions of Section A of this Article EIGHTH shall not be applicable to any particular Business Combination, and such Business Combination shall require only such affirmative vote, if any, as is required by law or by any other provision of this Certificate of Incorporation or the By-Laws of the Corporation or otherwise, if all of the conditions specified in either of the following Paragraphs 1 or 2 are met; provided, however, that in the case of a Business Combination that does not involve the payment of consideration to the holders of the Corporation’s outstanding
Capital Stock (as hereinafter defined), then the provisions of Section A of this Article EIGHTH must be satisfied unless the conditions specified in the following Paragraph 1 are met:
1. The Business Combination shall have been approved (and such approval not subsequently rescinded) by a majority of the Continuing Directors (as hereinafter defined), either specifically or as a transaction which is within an approved category of transactions with an Interested Stockholder. Such approval may be given prior to or subsequent to the acquisition of, or announcement or public disclosure of the intention to acquire, beneficial ownership of the Voting Stock that caused the Interested Stockholder to become an Interested Stockholder, provided, however, that approval shall be effective for the purposes of this Paragraph 1 only if obtained at a meeting at which a Continuing Director Quorum (as hereinafter defined) was present; and provided further, that such approval may be rescinded by a majority of the Continuing Directors at any meeting at which a Continuing Director Quorum is present and which is held prior to consummation of the proposed Business Combination.
2. All of the following conditions, if applicable, shall have been met:
The aggregate amount of cash and the Fair Market Value (as hereinafter defined), as of the date of the consummation of the Business Combination (the “Consummation Date”), of consideration other than cash to be received per share by holders of shares of any class or series of outstanding Capital Stock in such Business Combination shall be at least equal to the amount determined, as applicable, under Paragraph 2(a) or 2(b) below:
(a) if the Fair Market Value per share of such class or series of Capital Stock on the date of the first public announcement of the proposed Business Combination (the “Announcement Date”) is less than the Fair Market Value per share of such class or series of Capital Stock on the date on which the Interested Stockholder became an Interested Stockholder (the “Determination Date”), an amount (the “Premium Capital Stock Price”) equal to the sum of (i) the Fair Market Value per share of such class or series of Capital Stock on the Announcement Date plus (ii) the product of the Fair Market Value per share of such class or series of Capital Stock on the Announcement Date multiplied by the highest percentage premium over the closing sale price per share of such class or series of Capital Stock paid on any day by or on behalf of the Interested Stockholder for any share of such class or series of Capital Stock in connection with the acquisition by the Interested Stockholder of beneficial ownership of shares of such class or series of Capital Stock within the two-year period immediately prior to the Announcement Date or in the transaction in which it became an Interested Stockholder; provided, however, that if the Premium Capital Stock Price as determined above is greater than the highest per share price paid by or on behalf of the Interested Stockholder for any share of such class or series of Capital Stock in connection with the acquisition by the Interested Stockholder of beneficial ownership of shares of such class or series of Capital Stock within the two-year period immediately prior to the Announcement Date, the amount required under this Paragraph 2(a) shall be the higher of (A) such highest price paid by or on behalf of the Interested Stockholder, and (B) the Fair Market Value per share of such class or series of Capital Stock on the Announcement Date (the Fair Market Value and other prices per share of such class or series of Capital Stock referred to in this Paragraph 2(a) shall be in each case appropriately adjusted for any subsequent stock split, stock dividend, subdivision or reclassification with respect to such class or series of Capital Stock); or
(b) if the Fair Market Value per share of such class or series of Capital Stock on the Announcement Date is greater than or equal to the Fair Market Value per share of such class or series of Capital Stock on the Determination Date, in each case as appropriately adjusted for any subsequent stock split, stock dividend, subdivision or reclassification with respect to such class or series of Capital Stock, a price per share equal to the Fair Market Value per share of such class or series of Capital Stock on the Announcement Date.
The provisions of this Paragraph 2 shall be required to be met with respect to every class or series of outstanding Capital Stock which is the subject of the Business Combination whether or not the Interested Stockholder has previously acquired beneficial ownership of any shares of a particular class or series of Capital Stock.
(c) After the Determination Date and prior to the Consummation Date of such Business Combination:
(i) except as approved by a majority of the Continuing Directors at a meeting at which a Continuing Director Quorum is present, there shall have been no failure to declare and pay at the regular date
therefor any full quarterly dividends (whether or not cumulative) payable in accordance with the terms of any outstanding Capital Stock; (ii) there shall have been an increase in the annual rate of dividends paid on the Common Stock as necessary to reflect any reclassification (including any reverse stock split), recapitalization, reorganization or any similar transaction that has the effect of reducing the number of outstanding shares of Common Stock, unless the failure so to increase such annual rate is approved by a majority of the Continuing Directors at a meeting at which a Continuing Director Quorum is present; and (iii) such Interested Stockholder shall not have become the beneficial owner of any additional shares of Capital Stock except as part of the transaction that results in such Interested Stockholders becoming an Interested Stockholder and except in a transaction that, after giving effect thereto, would not result in any increase in the Interested Stockholder’s percentage beneficial ownership of any class or series of Capital Stock.
(d) After the Determination Date, such Interested Stockholder shall not have received the benefit, directly or indirectly (except proportionately as a stockholder of the Corporation), of any loans, advances, guarantees, pledges or other financial assistance or any tax credits or other tax advantages provided by the Corporation, whether in anticipation of or in connection with such Business Combination or otherwise.
(e) A proxy or information statement describing the proposed Business Combination and complying with the requirements of the Securities Exchange Act of 1934 and the rules and regulations thereunder (the “Act”) (or any subsequent provisions replacing such Act, rules or regulations), shall be mailed to all stockholders of the Corporation at least 30 days prior to the consummation of such Business Combination (whether or not such proxy or information statement is required to be mailed pursuant to such Act or subsequent provisions). The proxy or information statement shall contain on the first page thereof, in a prominent place, any statement as to the advisability (or inadvisability) of the Business Combination that the Continuing Directors, or any of them, may choose to make and, if deemed advisable by a majority of the Continuing Directors, the opinion of an investment banking firm selected by a majority of the Continuing Directors as to the fairness (or not) of the terms of the Business Combination from a financial point of view to the holders of the outstanding shares of Capital Stock other than the Interested Stockholder and its Affiliates or Associates (as hereinafter defined), such investment banking firm to be paid a reasonable fee for its services by the Corporation.
(f) Such Interested Stockholder shall not have made any major change in the Corporation’s business or equity capital structure without the approval of at least a majority of the Continuing Directors.
C. The following definitions shall apply with respect to this Article EIGHTH:
1. The term “Business Combination” shall mean:
(a) any merger or consolidation of the Corporation or any Major Subsidiary (as hereinafter defined) with, or any sale, lease, exchange, transfer or other disposition of substantially all the assets or outstanding shares of capital stock of the Corporation or any Major Subsidiary with or for the benefit of, (i) any Interested Stockholder or (ii) any other company (whether or not itself an Interested Stockholder) which is or after such merger, consolidation or sale, lease, exchange, transfer or other disposition would be an Affiliate or Associate of an Interested Stockholder; or
(b) any sale, lease, exchange, mortgage, pledge, transfer or other disposition or security arrangement, investment, loan, advance, guarantee, agreement to purchase, agreement to pay, extension of credit, joint venture participation or other arrangement (in one transaction or a series of transactions) with or for the benefit of any Interested Stockholder or any Affiliate or Associate of any Interested Stockholder involving any assets, securities or commitments of the Corporation, any Major Subsidiary or any Interested Stockholder or any Affiliate or Associate of any Interested Stockholder having an aggregate Fair Market Value and/or involving aggregate commitments of Twenty-Five Million dollars ($25,000,000) or more; or
(c) any reclassification of securities (including any reverse stock split), or recapitalization of the Corporation, or any merger or consolidation of the Corporation with any of its Subsidiaries (as hereinafter defined) or any other transaction (whether or not with or otherwise involving an Interested Stockholder) that has the effect, directly or indirectly, of increasing the proportionate share of any class or series of Capital Stock, or any securities convertible into Capital Stock or into equity securities of
any Subsidiary, that is beneficially owned by any Interested Stockholder or any Affiliate or Associate of any Interested Stockholder; or
(d) any agreement, contract or other arrangement providing for any one or more of the actions specified in the foregoing clauses (a) to (d);
provided, however, that no such aforementioned transaction shall be deemed to be a Business Combination subject to this Article EIGHTH if the Announcement Date of such transaction occurs more than eighteen months after the Determination Date with respect to such Interested Stockholder.
2. The term “Capital Stock” shall mean all capital stock of the Corporation authorized to be issued from time to time under Article FOURTH of this Certificate of Incorporation, including, without limitation, the Common Stock, and the term “Voting Stock” shall mean all Capital Stock which by its terms may be voted on all matters submitted to stockholders of the Corporation generally.
3. The term “person” shall mean any individual, firm, company or other entity and shall include any group comprised of any person and any other person with whom such person or any Affiliate or Associate of such person has any agreement, arrangement or understanding, directly or indirectly, for the purpose of acquiring, holding, voting or disposing of Capital Stock.
4. The term “Interested Stockholder” shall mean any person (other than the Corporation or any Subsidiary and other than any profit-sharing, employee stock ownership or other employee benefit plan of the Corporation or any trustee of or fiduciary with respect to any such plan when acting in such capacity) who (a) is, or has announced or publicly disclosed a plan or intention to become, the beneficial owner of Voting Stock representing twenty-five percent (25%) or more of the votes entitled to be cast by the holders of all then outstanding shares of Voting Stock; or (b) is an Affiliate or Associate of the Corporation and at any time within the two-year period immediately prior to the date in question was the beneficial owner of Voting Stock representing twenty-five percent (25%) or more of the votes entitled to be cast by the holders of all then outstanding shares of Voting Stock.
5. A person shall be a “beneficial owner” of any Capital Stock (a) which such person or any of its Affiliates or Associates beneficially owns directly or indirectly; (b) which such person or any of its Affiliates or Associates has, directly or indirectly, (i) the right to acquire (whether such right is exercisable immediately or subject only to the passage of time), pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (ii) the right to vote pursuant to any agreement, arrangement or understanding; or (c) which is beneficially owned, directly or indirectly, by any other person with which such person or any of its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares of Capital Stock. For the purposes of determining whether a person is an Interested Stockholder pursuant to Paragraph 4 of this Section C, the number of shares of Capital Stock deemed to be outstanding shall include shares deemed beneficially owned by such person through application of this Paragraph 5 of Section C, but shall not include any other shares of Capital Stock that may be reserved for issuance or issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants or options, or otherwise.
6. The terms “Affiliate” and “Associate” shall have the respective meanings ascribed to such terms in Rule 12b-2 under the Act as in effect on the date that this Article EIGHTH is approved and adopted by the Sole Incorporator (the term “registrant” in said Rule 12b-2 meaning in this case the Corporation); provided, however, that the terms “Affiliate” and “Associate” shall not include any profit-sharing, employee stock ownership or other employee benefit plan of the Corporation or any trustee of or fiduciary with respect to any such plan when acting in such capacity.
7. The term “Subsidiary” means any company of which a majority of any class of equity security is beneficially owned by the Corporation; provided, however, that for the purposes of the definition of Interested Stockholder set forth in Paragraph 4 of this Section C, the term “Subsidiary” shall mean only a company of which a majority of each class of equity security is beneficially owned by the Corporation.
8. The term “Major Subsidiary” means a Subsidiary having assets of twenty-five million dollars ($25,000,000) or more as reflected in the most recent fiscal year-end audited, or if unavailable, unaudited, consolidated balance sheet, prepared in accordance with applicable state insurance law with respect to
Subsidiaries engaged in an insurance business, and in accordance with generally accepted accounting principles with respect to Subsidiaries engaged in a business other than an insurance business.
9. The term “Continuing Director” means any member of the Board of Directors of the Corporation, while such person is a member of the Board of Directors, who is not an Affiliate or Associate or representative of the Interested Stockholder and who was a member of the Board of Directors prior to the time that the Interested Stockholder became an Interested Stockholder, and any successor of a Continuing Director while such successor is a member of the Board of Directors, who is not an Affiliate or Associate or representative of the Interested Stockholder and who is recommended or elected to succeed the Continuing Director by a majority of the Continuing Directors; provided, however, that the term “Continuing Director” shall not include any officer of the Corporation or of any Affiliate or Associate of the Corporation.
10. The term “Fair Market Value” means (a) in the case of cash, the amount of such cash; (b) in the case of stock, the highest closing sale price during the 30-day period immediately preceding the date in question of a share of such stock on the Composite Tape for New York Stock Exchange-Listed Stocks, or, if such stock is not quoted on the Composite Tape, on the New York Stock Exchange, or, if such stock is not listed on such Exchange, on the principal United States securities exchange registered under the Act on which such stock is listed, or, if such stock is not listed on any such exchange, the highest closing bid quotation with respect to a share of such stock during the 30-day period preceding the date in question on the National Association of Securities Dealers, Inc. Automated Quotations System or any similar system then in use, or if no such quotations are available, the fair market value on the date in question of a share of such stock as determined by a majority of the Continuing Directors in good faith; and (c) in the case of property other than cash or stock, the fair market value of such property on the date in question as determined in good faith by a majority of the Continuing Directors.
11. The term “Continuing Director Quorum” means at least two (2) Continuing Directors capable of exercising the power conferred upon them under the provisions of the Certificate of Incorporation and By-Laws of the Corporation.
12. In the event of any Business Combination in which the Corporation survives, the phrase “consideration other than cash to be received” as used in Paragraph 2 of Section B of this Article EIGHTH shall include the shares of Common Stock and/or the shares of any other class or series of Capital Stock retained by the holders of such shares.
D. A majority of the Continuing Directors at a meeting at which a Continuing Director Quorum is present shall have the power and duty to determine the purposes of this Article EIGHTH, on the basis of information known to them after reasonable inquiry, and to determine all questions arising under this Article EIGHTH, including, without limitation, (a) whether a person is an Interested Stockholder, (b) the number of shares of Capital Stock or other securities beneficially owned by any person, (c) whether a person is an Affiliate or Associate of another, (d) whether the assets that are the subject of any Business Combination have, or the consideration to be received for the issuance or transfer of securities by the Corporation or any Subsidiary in any Business Combination has, an aggregate Fair Market Value of twenty-five million dollars ($25,000,000) or more as provided in Paragraph 1(b) of Section C of this Article EIGHTH and (e) whether a Subsidiary is a Major Subsidiary. Any such determination made in good faith shall be binding and conclusive on all parties. In the event a Continuing Director Quorum cannot be attained at such meeting, all such determinations shall be made by the Delaware Court of Chancery.
E. Nothing contained in this Article EIGHTH shall be construed to relieve any Interested Stockholder from any fiduciary obligation imposed by law.
F. The fact that any Business Combination complies with the provisions of Section B of this Article EIGHTH shall not be construed to impose any fiduciary duty, obligation or responsibility on the Board of Directors, or any member thereof, to approve such Business Combination or recommend its adoption or approval to the stockholders of the Corporation, nor shall such compliance limit, prohibit or otherwise restrict in any manner the Board of Directors, or any member thereof, with respect to evaluations of or actions and responses taken with respect to such Business Combination.
G. Notwithstanding any other provisions of this Certificate of Incorporation or the By-Laws of the Corporation (and notwithstanding the fact that a lesser percentage or separate class vote may be specified by law, this Certificate of Incorporation or the By-Laws of the Corporation), the affirmative vote of the holders of not less than a majority of the voting power of the outstanding shares entitled to vote thereon, voting together as a single class, shall be
required to amend, alter, change or repeal, or adopt any provision as part of this Certificate of Incorporation inconsistent with the purpose and intent of this Article EIGHTH.
NINTH: In furtherance and not in limitation of the powers conferred upon it by the laws of the State of Delaware, the Board of Directors shall have the power to adopt, amend, alter or repeal the Corporation’s By-Laws. The affirmative vote of at least sixty-six and two-thirds percent (66 2/3%) of the entire Board of Directors shall be required to adopt, amend, alter or repeal the Corporation’s By-Laws. Notwithstanding any other provisions of this Certificate of Incorporation or the By-Laws of the Corporation (and notwithstanding the fact that a lesser percentage or separate class vote may be specified by law, this Certificate of Incorporation or the By-Laws of the Corporation), the affirmative vote of the holders of not less than a majority of the voting power of the outstanding shares entitled to vote thereon shall be required to adopt, amend, alter or repeal, or adopt any provision as part of this Certificate of Incorporation inconsistent with the purpose and intent of, this Article NINTH.
TENTH: No director of the Corporation shall be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director’s duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which the director derived an improper personal benefit.
ELEVENTH: Except as provided in Articles FOURTH, SEVENTH, EIGHTH and NINTH of this Certificate of Incorporation, the Corporation reserves the right to amend and repeal any provision contained in this Certificate of Incorporation in the manner prescribed by the laws of the State of Delaware, and all rights of stockholders shall be subject to this reservation.
This Restated Certificate of Incorporation was duly adopted by the Board of Directors in accordance with Section 245 of the General Corporation Law of the State of Delaware.
This Restated Certificate of Incorporation shall be effective upon filing.
IN WITNESS WHEREOF, the Corporation has caused this Restated Certificate of Incorporation to be signed by its duly authorized officer, this 30th day of October, 2009.
| CITIGROUP INC. | |
|---|---|
| /s/ Michael S. Helfer | |
| Name: | Michael S. Helfer |
| Corporate Secretary |
Exhibit I
8.125% Non-Cumulative Preferred Stock, Series AA
Section 1. Designation.
The designation of the series of preferred stock shall be “8.125% Non-Cumulative Preferred Stock, Series AA” (the “Series AA Preferred Stock”). Each share of Series AA Preferred Stock shall be identical in all respects to every other share of Series AA Preferred Stock. Series AA Preferred Stock will rank equally with Parity Stock, if any, will rank senior to Junior Stock and will rank junior to Senior Stock, if any, with respect to the payment of dividends and/or the distribution of assets in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company.
Section 2. Number of Shares.
The number of authorized shares of Series AA Preferred Stock shall be 149,500. That number from time to time may be increased (but not in excess of the total number of authorized shares of preferred stock) or decreased (but not below the number of shares of Series AA Preferred Stock then outstanding) by further resolution duly adopted by the Board of Directors, the Preferred Stock Committee or any other duly authorized committee thereof and by the filing of a certificate pursuant to the provisions of the General Corporation Law of the State of Delaware stating that such increase or reduction, as the case may be, has been so authorized. The Company shall have the authority to issue fractional shares of Series AA Preferred Stock.
Section 3. Definitions. As used herein with respect to Series AA Preferred Stock:
“Agent Members” has the meaning set forth in Section 15(c).
“Board of Directors” has the meaning set forth in the recitals above.
“Business Day” means any weekday that is not a legal holiday in New York, New York and is not a day on which banking institutions in New York, New York are authorized or required by law or regulation to be closed.
“Common Stock” means the common stock of the Company, par value $0.01 per share, or any other shares of the capital stock of the Company into which such shares of common stock shall be reclassified or changed.
“Depositary” means DTC or its nominee or any successor depositary appointed by the Company.
“Dividend Payment Date” shall have the meaning set forth in Section 4(a) hereof.
“Dividend Period” shall have the meaning set forth in Section 4(a) hereof.
“Dividend Record Date” shall have the meaning set forth in Section 4(a) hereof.
“DTC” means The Depository Trust Company.
“Global Series AA Preferred Stock” has the meaning set forth in Section 15(a).
“Holder” means the Person in whose name the shares of the Series AA Preferred Stock are registered, which may be treated by the Company, Transfer Agent, Registrar and paying agent as the absolute owner of the shares of Series AA Preferred Stock for the purpose of making payment and for all other purposes.
“Junior Stock” means the Common Stock and any other class or series of stock of the Company now existing or hereafter authorized over which Series AA Preferred Stock has preference or priority in the payment of dividends or in the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the Company.
“Nonpayment” shall have the meaning set forth in Section 7(b)(i) hereof.
“Officer” means the Chief Executive Officer, the Chairman, the Chief Administrative Officer, any Vice Chairman, the Chief Financial Officer, the Controller, the Chief Accounting Officer, the Treasurer and Head of Corporate Finance, any Assistant Treasurer, the General Counsel and Corporate Secretary and any Assistant Secretary of the Company.
“Parity Stock” means any class or series of stock of the Company hereafter authorized that ranks equally with the Series AA Preferred Stock in the payment of dividends and in the distribution of assets on any liquidation, dissolution or winding up of the Company.
“Person” means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint-stock company, limited liability company or trust.
“Preferred Stock Director” shall have the meaning set forth in Section 7(b)(i) hereof.
“Registrar” means the Transfer Agent acting in its capacity as registrar for the Series AA Preferred Stock, and its successors and assigns.
“Senior Stock” means any class or series of stock of the Company now existing or hereafter authorized which has preference or priority over the Series AA Preferred Stock as to the payment of dividends or in the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the Company.
“Series AA Preferred Stock” shall have the meaning set forth in Section 1 hereof.
“Transfer Agent” means The Bank of New York Mellon acting as Transfer Agent, Registrar and paying agent for the Series AA Preferred Stock, and its successors and assigns.
“Trust” shall have the meaning set forth in Section 6(d).
Section 4. Dividends.
(a) Rate. Holders shall be entitled to receive, if, as and when declared by the Board of Directors, the Preferred Stock Committee or any other duly authorized committee thereof, but only out of assets legally available therefor, non-cumulative cash dividends on the liquidation preference of $25,000 per share of Series AA Preferred Stock, and no more, payable quarterly in arrears on each February 15, May 15, August 15 and November 15; provided, however, if any such day is not a Business Day, then payment of any dividend otherwise payable on that date will be made on the next succeeding day that is a Business Day, unless that day falls in the next calendar year, in which case payment of such dividend will occur on the immediately preceding Business Day (in either case, without any interest or other payment in respect of such delay) (each such day on which dividends are payable a “Dividend Payment Date”). The period from and including the date of issuance of the Series AA Preferred Stock or any Dividend Payment Date to, but excluding, the next Dividend Payment Date is a “Dividend Period.” Dividends on each share of Series AA Preferred Stock will accrue on the liquidation preference of $25,000 per share at a rate per annum equal to 8.125%. The record date for payment of dividends on the Series AA Preferred Stock will be the fifteenth day of the calendar month immediately preceding the month during which the Dividend Payment Date falls or such other record date fixed by the Board of Directors, the Preferred Stock Committee or any other duly authorized committee thereof that is not more than 30 nor less than 10 days prior to such Dividend Payment Date (each, a “Dividend Record Date”). Any such day that is a Dividend Record Date will be a Dividend Record Date whether or not such day is a Business Day. The amount of dividends payable will be computed on the basis of a 360-day year of twelve 30-day months.
(b) Non-Cumulative Dividends. If the Board of Directors, the Preferred Stock Committee or any other duly authorized committee thereof does not declare a dividend on the Series AA Preferred Stock for any Dividend Period prior to the related Dividend Payment Date, that dividend will not accrue, and the Company will have no obligation to pay, and Holders shall have no right to receive, a dividend for that Dividend Period on the related Dividend Payment Date or at any future time, whether or not dividends on the Series AA Preferred Stock or any other series of preferred stock or common stock are declared for any subsequent Dividend Period with respect to Series AA Preferred Stock, Parity Stock, Junior Stock or any other class or series of authorized preferred stock of the Company. References herein to the “accrual” of dividends refer only to the determination of the amount of such dividend and do not imply that any right to a dividend arises prior to the date on which a dividend is declared.
(c) Priority of Dividends. So long as any share of Series AA Preferred Stock remains outstanding, unless as to a Dividend Payment Date full dividends on all outstanding shares of the Series AA Preferred Stock have been declared and paid or declared and a sum sufficient for the payment of those dividends has been set aside for the Dividend Period then ending, the Company will not, and will cause its subsidiaries not to, during the next succeeding Dividend Period that commences on such Dividend Payment Date, declare or pay any dividend on, make any distributions relating to, or redeem, purchase, acquire or make a liquidation payment relating to, any Junior Stock, or make any guarantee payment with respect thereto, other than:
(i) purchases, redemptions or other acquisitions of shares of Junior Stock in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of employees, officers, directors or consultants;
(ii) purchases of shares of Common Stock pursuant to a contractually binding requirement to buy stock existing prior to the commencement of the then-current dividend period, including under a contractually binding stock repurchase plan;
(iii) as a result of an exchange or conversion of any class or series of Junior Stock for any other class or series of Junior Stock;
(iv) the purchase of fractional interests in shares of Junior Stock pursuant to the conversion or exchange provisions of such Junior Stock or the security being converted or exchanged;
(v) the purchase of Junior Stock by an investment banking subsidiary of the Company in connection with the distribution thereof; or
(vi) the purchase of Junior Stock by any investment banking subsidiary of the Company in connection with market-making or other secondary market activities in the ordinary course of the business of such subsidiary.
The foregoing restriction, however, will not apply to any Junior Stock dividends paid by the Company where the dividend stock is the same stock as that on which the dividend is being paid.
Except as provided below, for so long as any share of Series AA Preferred Stock remains outstanding, if dividends are not declared and paid in full upon the shares of Series AA Preferred Stock and any Parity Stock, all dividends declared upon shares of Series AA Preferred Stock and any Parity Stock will be declared on a proportional basis so that the amount of dividends declared per share will bear to each other the same ratio that accrued dividends for the then-current Dividend Period per share of Series AA Preferred Stock and accrued dividends for the then-current Dividend Period per share of any Parity Stock (including, in the case of any such Parity Stock that bears cumulative dividends, all accrued and unpaid dividends) bear to each other.
Subject to the foregoing, and not otherwise, such dividends payable in cash, stock or otherwise, as may be determined by the Board of Directors, the Preferred Stock Committee or any other duly authorized committee thereof, may be declared and paid on any Junior Stock and Parity Stock from time to time out of any assets legally available for such payment, and Holders will not be entitled to participate in those dividends.
Section 5. Liquidation Rights.
(a) Liquidation. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company, Holders shall be entitled, out of assets legally available therefor, before any distribution or payment out of the assets of the Company may be made to or set aside for the holders of any Junior Stock and subject to the rights of the holders of any class or series of securities ranking senior to or on parity with Series AA Preferred Stock upon liquidation and the rights of the Company’s depositors and other creditors, to receive in full a liquidating distribution in the amount of the liquidation preference of $25,000 per share, plus any dividends thereon from the last dividend payment date to, but excluding, the date of the liquidation, dissolution or winding up if and to the extent declared. Holders shall not be entitled to any further payments in the event of any such voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company other than what is expressly provided for in this Section 5.
(b) Partial Payment. If the assets of the Company are not sufficient to pay in full the liquidation preference plus any dividends which have been declared but not yet paid to all Holders and all holders of any Parity Stock, the amounts paid to the Holders and to the holders of all Parity Stock shall be pro rata in accordance with the respective aggregate liquidating distributions to which they would otherwise be entitled.
(c) Residual Distributions. If the respective aggregate liquidating distributions to which all Holders and all holders of any Parity Stock are entitled have been paid, the holders of Junior Stock shall be entitled to receive all remaining assets of the Company according to their respective rights and preferences.
(d) Merger, Consolidation and Sale of Assets Not Liquidation. For purposes of this Section 5, the sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the property and assets of the Company shall not be deemed a voluntary or involuntary dissolution, liquidation or winding up of the
affairs of the Company, nor shall the merger, consolidation or any other business combination transaction of the Company into or with any other corporation or person or the merger, consolidation or any other business combination transaction of any other corporation or person into or with the Company be deemed to be a voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company.
Section 6. Redemption.
(a) Optional Redemption. The Company, at the option of its Board of Directors, the Preferred Stock Committee or any other duly authorized committee thereof, may redeem out of funds legally available therefor, in whole or in part, the shares of Series AA Preferred Stock at the time outstanding, on any Dividend Payment Date as to which the Company has declared a dividend in full on the Series AA Preferred Stock on or after the Dividend Payment Date on February 15, 2018, upon notice given as provided in Section 6(b) below, and at a redemption price equal to $25,000 per share; provided, however, that the Company may not effect a partial redemption of the Series AA Preferred Stock unless at least 2,000 shares ($50,000,000 aggregate liquidation amount) of Series AA Preferred Stock, excluding shares of Series AA Preferred Stock held by the Company or its subsidiaries, remain outstanding after giving effect to such partial redemption.
(b) Notice of Redemption. Notice of every redemption of shares of Series AA Preferred Stock shall be mailed by first class mail, postage prepaid, addressed to the Holders of such shares to be redeemed at their respective last addresses appearing on the stock register of the Company. Such mailing shall be at least 30 days and not more than 60 days before the date fixed for redemption. Any notice mailed as provided in this Section 6(b) shall be conclusively presumed to have been duly given, whether or not the Holder receives such notice, but failure duly to give such notice by mail, or any defect in such notice or in the mailing thereof, to any Holder of shares of Series AA Preferred Stock designated for redemption shall not affect the validity of the proceedings for the redemption of any other shares of Series AA Preferred Stock. Each notice shall state:
(i) the redemption date;
(ii) the number of shares of Series AA Preferred Stock to be redeemed and, if fewer than all the shares of a Holder are to be redeemed, the number of such shares to be redeemed;
(iii) the redemption price;
(iv) the place or places where the certificates for such shares are to be surrendered for payment of the redemption price; and
(v) that dividends on the shares to be redeemed will cease to accrue on the redemption date.
Notwithstanding the foregoing, if the Series AA Preferred Stock is held in book-entry form through DTC, the Company may give such notice in any manner permitted by DTC.
(c) Partial Redemption. In case of any redemption of only part of the shares of Series AA Preferred Stock at the time outstanding, the shares of Series AA Preferred Stock to be redeemed shall be selected pro rata from the Holders in proportion to the number of shares of Series AA Preferred Stock held by such Holders, by lot or in such other manner as the Board of Directors, the Preferred Stock Committee or any other duly authorized committee thereof may determine to be fair and equitable. Subject to the provisions of this Section 6, the Board of Directors, the Preferred Stock Committee or any other duly authorized committee thereof shall have full power and authority to prescribe the terms and conditions upon which shares of Series AA Preferred Stock shall be redeemed from time to time.
(d) Effectiveness of Redemption. If notice of redemption has been duly given and if on or before the redemption date specified in the notice all funds necessary for the redemption have been set aside by the Company, separate and apart from its other assets, in trust for the pro rata benefit of the Holders of the shares called for redemption, so as to be and continue to be available therefor, or deposited by the Company with a bank or trust company selected by the Board of Directors, the Preferred Stock Committee or any other duly authorized committee thereof (the “Trust”) in trust for the pro rata benefit of the Holders of the shares called for redemption, then, notwithstanding that any certificate for any share so called for redemption has not been surrendered for cancellation, on and after the redemption date all shares so called for redemption shall cease to be outstanding, all dividends with respect to such shares shall cease to accrue on such redemption date, and all rights with respect to such shares shall forthwith on such redemption date cease and terminate, except only the right of the Holders thereof to receive the amount payable on such redemption from the Trust at any time after the redemption date from the funds so deposited, without interest. The Company shall be entitled to receive, from
time to time, from the Trust any interest accrued on such funds, and the Holders of any shares called for redemption shall have no claim to any such interest. Any funds so deposited and unclaimed at the end of three years from the redemption date shall, to the extent permitted by law, be released or repaid to the Company, and in the event of such repayment to the Company, the Holders of the shares so called for redemption shall be deemed to be unsecured creditors of the Company for an amount equivalent to the amount deposited as stated above for the redemption of such shares and so repaid to the Company, but shall in no event be entitled to any interest.
Section 7. Voting Rights.
(a) General. The Holders shall not be entitled to vote on any matter except as set forth in Section 7(b) below or as required by Delaware law.
(b) Special Voting Right.
(i) Voting Right. If and whenever dividends on the Series AA Preferred Stock or any other class or series of preferred stock that ranks on parity with Series AA Preferred Stock as to payment of dividends, and upon which voting rights equivalent to those granted by this Section 7(b)(i) have been conferred and are exercisable, have not been paid in an aggregate amount equal, as to any class or series, to at least six quarterly Dividend Periods (whether consecutive or not) (a “Nonpayment”), the number of directors constituting the Board of Directors shall be increased by two, and the Holders (together with holders of any class or series of the Company’s authorized preferred stock having equivalent voting rights), shall have the right, voting separately as a single class without regard to class or series (and with voting rights allocated pro rata based on the liquidation preference of each such class or series), to the exclusion of the holders of Common Stock, to elect two directors of the Company to fill such newly created directorships (and to fill any vacancies in the terms of such directorships), provided that the Holders and the holders of any such other class or series shall not be entitled to elect such directors to the extent such election would cause the Company to violate the corporate governance requirements of the New York Stock Exchange (or other exchange on which the Company’s securities may be listed) that listed companies must have a majority of independent directors and further provided that the Board of Directors shall at no time include more than two such directors. Each such director elected by the Holders and any other class or series of preferred stock that ranks on parity with the Series AA Preferred Stock as to payment of dividends and having equivalent voting rights is a “Preferred Stock Director.”
(ii) Election. The election of the Preferred Stock Directors will take place at any annual meeting of stockholders or any special meeting of the Holders and any other class or series of stock of the Company that ranks on parity with Series AA Preferred Stock as to payment of dividends and having equivalent voting rights and for which dividends have not been paid, called as provided herein. At any time after the special voting power has vested pursuant to Section 7(b)(i) above, the secretary of the Company may, and upon the written request of the Holders of at least 20% of the Series AA Preferred Stock or the holders of at least 20% of such other series (addressed to the secretary at the Company’s principal office) must (unless such request is received less than 90 days before the date fixed for the next annual or special meeting of the stockholders, in which event such election shall be held at such next annual or special meeting of stockholders), call a special meeting of the Holders and any other class or series of preferred stock that ranks on parity with Series AA Preferred Stock as to payment of dividends and having equivalent voting rights and for which dividends have not been paid for the election of the two directors to be elected by them as provided in Section 7(b)(iii) below. The Preferred Stock Directors shall each be entitled to one vote per director on any matter.
(iii) Notice of Special Meeting. Notice for a special meeting will be given in a similar manner to that provided in the Company’s by-laws for a special meeting of the stockholders. If the secretary of the Company does not call a special meeting within 20 days after receipt of any such request, then any Holder may (at the expense of the Company) call such meeting, upon notice as provided in this Section 7(b)(iii), and for that purpose will have access to the stock register of the Company. The Preferred Stock Directors elected at any such special meeting will hold office until the next annual meeting of the stockholders of the Company unless they have been previously terminated or removed pursuant to Section 7(b)(iv). In case any vacancy in the office of a Preferred Stock Director occurs (other than prior to the initial election of the Preferred Stock Directors), the vacancy may be filled by the written consent of the Preferred Stock Director remaining in office, or if none remains in office, by the vote of the Holders (together with holders of any other class of the Company’s authorized preferred stock having equivalent voting rights, whether or not the holders of such preferred stock would be entitled to vote for the election of directors if such default in dividends did not exist) to serve until the next annual meeting of the stockholders.
(iv) Termination; Removal. Whenever the Company has paid full dividends for at least four consecutive quarterly dividend periods following a Nonpayment on the Series AA Preferred Stock and any other class or series of non-cumulative preferred stock ranking on parity with Series AA Preferred Stock as to payment of dividends, if any, and has paid cumulative dividends in full on any class or series of cumulative preferred stock ranking on parity with the Series AA Preferred Stock as to payment of dividends (in each case, upon which equivalent voting rights to those set forth in Section 7(b)(iii) have been conferred and are exercisable), then the right of the Holders to elect the Preferred Stock Directors will cease (but subject always to the same provisions for the vesting of the special voting rights in the case of any similar non-payment of dividends in respect of future Dividend Periods). The terms of office of the Preferred Stock Directors will immediately terminate, and the number of directors constituting the Board of Directors will be reduced accordingly. Any Preferred Stock Director may be removed at any time without cause by the Holders of a majority of the outstanding shares of the Series AA Preferred Stock (together with holders of any other class of the Company’s authorized preferred stock having equivalent voting rights, whether or not the holders of such preferred stock would be entitled to vote for the election of directors if such default in dividends did not exist) when they have the voting rights described in this Section 7(b).
(c) Senior Issuances; Adverse Changes. So long as any shares of Series AA Preferred Stock are outstanding, the vote or consent of the Holders of at least two-thirds of the shares of Series AA Preferred Stock at the time outstanding, voting as a class with all other series of preferred stock ranking equally with the Series AA Preferred Stock and entitled to vote thereon, given in person or by proxy, either in writing without a meeting or by vote at any meeting called for the purpose, will be necessary for effecting or validating any of the following actions, whether or not such approval is required by Delaware law:
(i) any amendment, alteration or repeal of any provision of the Company’s Certificate of Incorporation (including the certificate of designation creating the Series AA Preferred Stock) or the Company’s by-laws that would alter or change the voting powers, preferences or special rights of the Series AA Preferred Stock so as to affect them adversely;
(ii) any amendment or alteration of the Company’s certificate of incorporation to authorize or create, or increase the authorized amount of, any shares of, or any securities convertible into shares of, any class or series of the Company’s capital stock ranking prior to the Series AA Preferred Stock in the payment of dividends or in the distribution of assets on any liquidation, dissolution or winding-up of the Company; or
(iii) the consummation of a binding share exchange or reclassification involving the Series AA Preferred Stock or a merger or consolidation of the Company with another entity, except that holders of Series AA Preferred Stock will have no right to vote under this provision or otherwise under Delaware law if in each case (i) the Series AA Preferred Stock remains outstanding or, in the case of any such merger or consolidation with respect to which the Company is not the surviving or resulting entity, is converted into or exchanged for preferred securities of the surviving or resulting entity or its ultimate parent, that is an entity organized and existing under the laws of the United States of America, any state thereof or the District of Columbia and that is a corporation for U.S. federal income tax purposes (or if such entity is not a corporation, the Company having received an opinion of nationally recognized counsel experienced in such matters to the effect that Holders will be subject to tax for U.S. federal income tax purposes with respect to such new preferred securities after such merger or consolidation in the same amount, at the same time and otherwise in the same manner as would have been the case under the Series AA Preferred Stock prior to such merger or consolidation), and (ii) such Series AA Preferred Stock remaining outstanding or such preferred securities, as the case may be, have such rights, preferences, privileges and voting powers, taken as a whole, as are not materially less favorable to the holders thereof than the rights, preferences, privileges and voting powers of the Series AA Preferred Stock, taken as a whole; provided, however, that any increase in the amount of the authorized or issued Series AA Preferred Stock or authorized preferred stock or any securities convertible into preferred stock or the creation and issuance, or an increase in the authorized or issued amount, of other series of preferred stock or any securities convertible into preferred stock ranking equally with and/or junior to the Series AA Preferred Stock with respect to the payment of dividends (whether such dividends are cumulative or non-cumulative) and/or the distribution of assets upon the Company’s liquidation, dissolution or winding up will not be deemed to adversely affect the voting powers, preferences or special rights of the Series AA Preferred Stock and Holders will have no right to vote on such an increase, creation or issuance.
If any amendment, alteration, repeal, share exchange, reclassification, merger or consolidation specified in this Section 7(c) would adversely affect one or more but not all series of preferred stock of the Company, then only such series of preferred stock as are
adversely affected by and entitled to vote on the matter shall vote on the matter together as a single class (in lieu of all other series of preferred stock).
(d) No Vote if Redemption. No vote or consent of the Holders shall be required pursuant to Section 7(b) or (c) if, at or prior to the time when the act with respect to such vote or consent would otherwise be required shall be effected, the Company shall have redeemed or shall have called for redemption all outstanding shares of Series AA Preferred Stock, with proper notice and sufficient funds having been set aside for such redemption, in each case pursuant to Section 6 above.
Section 8. Preemption and Conversion Rights.
The Holders shall not have any rights of preemption or conversion.
Section 9. Rank.
Notwithstanding anything set forth in the Certificate of Incorporation or this Certificate of Designation to the contrary, the Board of Directors, the Preferred Stock Committee or any other duly authorized committee thereof, without the vote of the Holders, may authorize and issue additional shares of Junior Stock or Parity Stock.
Section 10. Repurchase.
Subject to the limitations imposed herein, the Company may purchase and sell Series AA Preferred Stock from time to time to such extent, in such manner, and upon such terms as the Board of Directors, the Preferred Stock Committee or any other duly authorized committee thereof may determine; provided, however, that the Company shall not use any of its funds for any such purchase when there are reasonable grounds to believe that the Company is, or by such purchase would be, rendered insolvent; provided, further, however, that in the event that the Company beneficially owns any Series AA Preferred Stock the Company will procure that voting rights in respect of such Series AA Preferred Stock are not exercised.
Section 11. Unissued or Reacquired Shares.
Shares of Series AA Preferred Stock not issued or which have been issued and redeemed or otherwise purchased or acquired by the Company shall be restored to the status of authorized but unissued shares of preferred stock without designation as to series.
Section 12. No Sinking Fund.
Shares of Series AA Preferred Stock are not subject to the operation of a sinking fund.
Section 13. Transfer Agent, Registrar and Paying Agent.
The duly appointed Transfer Agent, Registrar and paying agent for the Series AA Preferred Stock shall be The Bank of New York Mellon. The Company may, in its sole discretion, remove the Transfer Agent in accordance with the agreement between the Company and the Transfer Agent; provided that the Company shall appoint a successor transfer agent who shall accept such appointment prior to the effectiveness of such removal. Upon any such removal or appointment, the Company shall send notice thereof by first-class mail, postage prepaid, to the Holders.
Section 14. Replacement Certificates.
Mutilated, Destroyed, Stolen and Lost Certificates. If physical certificates are issued, the Company shall replace any mutilated certificate at the Holder’s expense upon surrender of that certificate to the Transfer Agent. The Company shall replace certificates that become destroyed, stolen or lost at the Holder’s expense upon delivery to the Company and the Transfer Agent of satisfactory evidence that the certificate has been destroyed, stolen or lost, together with any indemnity that may be required by the Transfer Agent and the Company.
Section 15. Form.
(a) Global Series AA Preferred Stock. Series AA Preferred Stock may be issued in the form of one or more permanent global shares of Series AA Preferred Stock in definitive, fully registered form with a global legend in substantially the form attached hereto as Exhibit A (each, a “Global Series AA Preferred Stock”), which is hereby incorporated in and expressly made a part of this Restated Certificate of Incorporation. The Global Series AA Preferred Stock may have notations, legends or endorsements required by law, stock exchange rules, agreements to which the Company is subject, if any, or usage (provided that any such notation, legend or endorsement is in a form acceptable to the Company). The
aggregate number of shares represented by each Global Series AA Preferred Stock may from time to time be increased or decreased by adjustments made on the records of the Registrar and the Depositary or its nominee as hereinafter provided. This Section 15(a) shall apply only to a Global Series AA Preferred Stock deposited with or on behalf of the Depositary.
(b) Delivery to Depositary. If Global Series AA Preferred Stock is issued, the Company shall execute and the Registrar shall, in accordance with this Section, countersign and deliver initially one or more Global Series AA Preferred Stock that (i) shall be registered in the name of Cede & Co. or other nominee of the Depositary and (ii) shall be delivered by the Registrar to the Depositary or pursuant to instructions received from the Depositary or held by the Registrar as custodian for the Depositary pursuant to an agreement between the Depositary and the Registrar.
(c) Agent Members. If Global Series AA Preferred Stock is issued, members of, or participants in, the Depositary (“Agent Members”) shall have no rights under this Certificate of Designation with respect to any Global Series AA Preferred Stock held on their behalf by the Depositary or by the Registrar as the custodian of the Depositary or under such Global Series AA Preferred Stock, and the Depositary may be treated by the Company, the Registrar and any agent of the Company or the Registrar as the absolute owner of such Global Series AA Preferred Stock for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Registrar or any agent of the Company or the Registrar from giving effect to any written certification, proxy or other authorization furnished by the Depositary or impair, as between the Depositary and its Agent Members, the operation of customary practices of the Depositary governing the exercise of the rights of a holder of a beneficial interest in any Global Series AA Preferred Stock. If Global Series AA Preferred Stock is issued, the Depositary may grant proxies or otherwise authorize any Person to take any action that a Holder is entitled to take pursuant to the Series AA Preferred Stock, or this Certificate of Designation or the Certificate of Incorporation.
(d) Physical Certificates. Owners of beneficial interests in any Global Series AA Preferred Stock shall not be entitled to receive physical delivery of certificated shares of Series AA Preferred Stock, unless (x) the Depositary has notified the Company that it is unwilling or unable to continue as Depositary for the Global Series AA Preferred Stock and the Company does not appoint a qualified replacement for the Depositary within 90 days, (y) the Depositary ceases to be a “clearing agency” registered under the Exchange Act and the Company does not appoint a qualified replacement for the Depositary within 90 days or (z) the Company decides to discontinue the use of book-entry transfer through the Depositary. In any such case, the Global Series AA Preferred Stock shall be exchanged in whole for definitive shares of Series AA Preferred Stock in registered form, with the same terms and of an equal aggregate Liquidation Preference. Such definitive shares of Series AA Preferred Stock shall be registered in the name or names of the Person or Persons specified by the Depositary in a written instrument to the Registrar.
(e) Signature. An Officer shall sign any Global Series AA Preferred Stock for the Company, in accordance with the Company’s by-laws and applicable law, by manual or facsimile signature. If an Officer whose signature is on a Global Series AA Preferred Stock no longer holds that office at the time the Transfer Agent countersigned the Global Series AA Preferred Stock, the Global Series AA Preferred Stock shall be valid nevertheless. A Global Series AA Preferred Stock shall not be valid until an authorized signatory of the Transfer Agent manually countersigns Global Series AA Preferred Stock. Each Global Series AA Preferred Stock shall be dated the date of its countersignature.
Section 16. Taxes.
(a) Transfer Taxes. The Company shall pay any and all stock transfer, documentary, stamp and similar taxes that may be payable in respect of any issuance or delivery of shares of Series AA Preferred Stock or shares of Common Stock or other securities issued on account of Series AA Preferred Stock pursuant hereto or certificates representing such shares or securities. The Company shall not, however, be required to pay any such tax that may be payable in respect of any transfer involved in the issuance or delivery of shares of Series AA Preferred Stock, shares of Common Stock or other securities in a name other than that in which the shares of Series AA Preferred Stock with respect to which such shares or other securities are issued or delivered were registered, or in respect of any payment to any Person other than a payment to the registered holder thereof, and shall not be required to make any such issuance, delivery or payment unless and until the Person otherwise entitled to such issuance, delivery or payment has paid to the Company the amount of any such tax or has established, to the satisfaction of the Company, that such tax has been paid or is not payable.
(b) Withholding. All payments and distributions (or deemed distributions) on the shares of Series AA Preferred Stock shall be subject to withholding and backup withholding of tax to the extent required by law, subject to applicable exemptions, and amounts withheld, if any, shall be treated as received by Holders.
Section 17. Notices.
All notices referred to herein shall be in writing, and, unless otherwise specified herein, all notices hereunder shall be deemed to have been given upon the earlier of receipt thereof or three Business Days after the mailing thereof if sent by registered or certified mail (unless first class mail shall be specifically permitted for such notice under the terms of this Certificate of Designation) with postage prepaid, addressed: (i) if to the Company, to its office at 399 Park Avenue, New York, New York 10043 (Attention: Corporate Secretary) or to the Transfer Agent at its office at 480 Washington Boulevard, 29th Floor, Jersey City, New Jersey 07310 (Attention: Corporate Trust Office), or other agent of the Company designated as permitted by this Certificate of Designation, or (ii) if to any Holder, to such Holder at the address of such Holder as listed in the stock record books of the Company (which may include the records of the Transfer Agent) or (iii) to such other address as the Company or any such Holder, as the case may be, shall have designated by notice similarly given.
Exhibit A
FORM OF 8.125% NON-CUMULATIVE PREFERRED STOCK, SERIES AA
FACE OF SECURITY
[THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION UNDER THE SECURITIES ACT. BY ITS ACQUISITION HEREOF, THE HOLDER AGREES TO OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY PRIOR TO THE DATE THAT IS ONE YEAR AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH CITIGROUP INC. (THE “COMPANY”) OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) (THE “RESALE RESTRICTION TERMINATION DATE”) ONLY (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS SHARES OF THE SERIES AA PREFERRED STOCK ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, OR (D) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY’S AND THE TRANSFER AGENTS RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE (D) PRIOR TO THE RESALE RESTRICTION TERMINATION DATE TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATIONS AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRANSFER AGENT. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.]
[IF GLOBAL PREFERRED STOCK IS ISSUED: UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO. HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR’S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE CERTIFICATE OF DESIGNATION REFERRED TO BELOW.]
IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH REGISTRAR AND TRANSFER AGENT MAY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.
| Certificate Number | Number of Shares of Series AA Preferred Stock |
|---|---|
| CUSIP NO.: | |
| --- |
CITIGROUP INC.
8.125% Non-Cumulative Preferred Stock, Series AA (par value $1.00 per share) (liquidation preference $25,000 per share)
Citigroup Inc., a Delaware corporation (the “Company”), hereby certifies that [ ] (the “Holder”) is the registered owner of [ ](1) [ , or such number as is indicated in the records of the Registrar and the Depository,](2) fully paid and non-assessable shares of the Company’s designated 8.125% Non-Cumulative Preferred Stock, Series AA, with a par value of $1.00 per share and a liquidation preference of $25,000 per share (the “Series AA Preferred Stock”). The shares of Series AA Preferred Stock are transferable on the books and records of the Registrar, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer. The designations, rights, privileges, restrictions, preferences and other terms and provisions of the Series AA Preferred Stock represented hereby are and shall in all respects be subject to the provisions of the Certificate of Designation dated January 24. 2008 as the same may be amended from time to time (the “Certificate of Designation”). Capitalized terms used herein but not defined shall have the meaning given them in the Certificate of Designation. The Company will provide a copy of the Certificate of Designation to a Holder without charge upon written request to the Company at its principal place of business.
Reference is hereby made to select provisions of the Series AA Preferred Stock set forth on the reverse hereof, and to the Certificate of Designation, which select provisions and the Certificate of Designation shall for all purposes have the same effect as if set forth at this place.
Upon receipt of this certificate, the Holder is bound by the Certificate of Designation and is entitled to the benefits thereunder.
Unless the Registrar has properly countersigned, these shares of Series AA Preferred Stock shall not be entitled to any benefit under the Certificate of Designation or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, this certificate has been executed on behalf of the Company by its [Title] this day of , .
| CITIGROUP INC. |
|---|
| By: |
| Name: |
| Title: |
(1) This phrase should be included only if the share certificate evidences certificated shares of Series AA Preferred Stock.
(2) This phrase should be included only if the share certificate evidences Global Series AA Preferred Stock.
REGISTRAR’S COUNTERSIGNATURE
These are shares of Series AA Preferred Stock referred to in the within-mentioned Certificate of Designation.
Dated:
| THE BANK OF NEW YORK MELLON, as Registrar |
|---|
| By: |
| Name: |
| Title: |
REVERSE OF CERTIFICATE
Dividends on each share of Series AA Preferred Stock shall be payable at the rate provided in the Certificate of Designation.
The shares of Series AA Preferred Stock shall be redeemable at the option of the Company in the manner and in accordance with the terms set forth in the Certificate of Designation.
The Company shall furnish without charge to each holder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class or series of share capital issued by the Company and the qualifications, limitations or restrictions of such preferences and/or rights.
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers the shares of Series AA Preferred Stock evidenced hereby to:
(Insert assignee’s social security or taxpayer identification number)
(Insert address and zip code of assignee)
and irrevocably appoints:
as agent to transfer the shares of Series AA Preferred Stock evidenced hereby on the books of the Transfer Agent. The agent may substitute another to act for him or her.
Date:
Signature:
(Sign exactly as your name appears on the other side of this Certificate)
| Signature Guarantee: |
|---|
(Signature must be guaranteed by an “eligible guarantor institution” that is a bank, stockbroker, savings and loan association or credit union meeting the requirements of the Transfer Agent, which requirements include membership or participation in the Securities Transfer Agents Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Transfer Agent in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.)
Exhibit II
8.40% Fixed Rate / Floating Rate Non-Cumulative Preferred Stock, Series E
Section 1. Designation.
The designation of the series of preferred stock shall be “8.40% Fixed Rate / Floating Rate Non-Cumulative Preferred Stock, Series E.” Each share of Series E Preferred Stock shall be identical in all respects to every other share of Series E Preferred Stock. Series E Preferred Stock will rank equally with Parity Stock, will rank senior to Junior Stock and will rank junior to Senior Stock, if any, with respect to the payment of dividends and/or the distribution of assets in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affair of the Company.
Section 2. Number of Shares.
The number of authorized shares of Series E Preferred Stock shall be 240,000. That number from time to time may be increased (but not in excess of the total number of authorized shares of preferred stock) or decreased (but not below the number of shares of Series E Preferred Stock then outstanding) by further resolution duly adopted by the Board of Directors, the Preferred Stock Committee or any other duly authorized committee thereof and by the filing of a certificate pursuant to the provisions of the General Corporation Law of the State of Delaware stating that such increase or reduction, as the case may be, has been so authorized. The Company shall have the authority to issue fractional shares of Series E Preferred Stock.
Section 3. Definitions. As used herein with respect to Series E Preferred Stock:
“Agent Members” has the meaning set forth in Section 15(c).
“Board of Directors” has the meaning set forth in the recitals above.
“Business Day” means any weekday that is not a legal holiday in New York City and is not a day on which banking institutions in New York City are authorized or required by law or regulation to be closed.
“Calculation Agent” means the Transfer Agent acting in its capacity as calculation agent for the Series E Preferred Stock, and its successors and assigns.
“Common Stock” means the common stock of the Company, par value $0.01 per share, or any other shares of the capital stock of the Company into which such shares of common stock shall be reclassified or changed.
“Depositary” means DTC or its nominee or any successor depositary appointed by the Company.
“Dividend Payment Date” shall have the meaning set forth in Section 4(a) hereof.
“Dividend Period” shall have the meaning set forth in Section 4(a) hereof.
“Dividend Record Date” shall have the meaning set forth in Section 4(a) hereof.
“DTC” means The Depository Trust Company.
“Global Series E Preferred Stock” has the meaning set forth in Section 15(a).
“Holder” means the Person in whose name the shares of the Series E Preferred Stock are registered, which may be treated by the Company, Calculation Agent, Transfer Agent, Registrar and paying agent as the absolute owner of the shares of Series E Preferred Stock for the purpose of making payment and for all other purposes.
“Junior Stock” means the Common Stock and any other class or series of stock of the Company now existing or hereafter authorized over which Series E Preferred Stock has preference or priority in the payment of dividends or in the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the Company.
“LIBOR Determination. Date” means the second London Banking Day immediately preceding the first day of the relevant Dividend Period.
“London Banking Day” means any day on which commercial banks are open for general business (including dealings in deposits in United States dollars) in London.
“Nonpayment” shall have the meaning set forth in Section 7(b)(i) hereof.
“Officer” means the Chief Executive Officer, the Chairman, the Chief Administrative Officer, any Vice Chairman, the Chief Financial Officer, the Controller, the Chief Accounting Officer, the Treasurer and Head of Corporate Finance, any Assistant Treasurer, the General Counsel and Corporate Secretary and any Assistant Secretary of the Company.
“Parity Stock” means any class or series of stock of the Company now existing or hereafter authorized that ranks equally with the Series E Preferred Stock in the payment of dividends and in the distribution of assets on any liquidation, dissolution or winding up of the Company.
“Person” means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint-stock company, limited liability company or trust.
“Preferred Stock Director” shall have the meaning set forth in Section 7(b)(i) hereof.
“Registrar” means the Transfer Agent acting in its capacity as registrar for the Series E Preferred Stock, and its successors and assigns.
“Reuters Screen LIBOR01 Page” means the display designated on the Reuters Screen LIBOR01 Page (or such other page as may replace Reuters Screen LIBOR01 Page on the service or such other service as may be nominated by the British Bankers’ Association for the purpose of displaying London interbank offered rates for United States dollar deposits).
“Senior Stock” means any class or series of stock of the Company now existing or hereafter authorized which has preference or priority over the Series E Preferred Stock as to the payment of dividends or in the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the Company.
“Series E Preferred Stock” shall have the meaning set forth in Section I hereof.
“Three-month LIBOR” means the rate (expressed as a percentage per annum) for deposits in United States dollars for a three-month period commencing on the first day of a Dividend Period that appears on the Reuters Screen LIBOR01 Page as of 11:00 a.m. (London time) on the LIBOR Determination Date for that Dividend Period. If such rate does not appear on Reuters Screen LIBOR01 Page, Three-month LIBOR will be determined on the basis of the rates at which deposits in United States dollars for a three-month period commencing on the first day of that Dividend Period and in a principal amount of not less than $1 million are offered to prime banks in the London interbank market by four major banks in the London interbank market selected by the Calculation Agent (after consultation with the Company), at approximately 11:00 a.m., London time, on the LIBOR Determination Date for that Dividend Period. The Calculation Agent will request the principal London office of each of such banks to provide a quotation of its rate. If at least two such quotations are provided, Three-month LIBOR with respect to that Dividend Period will be the arithmetic mean (rounded upward if necessary to the nearest whole multiple of 0.00001%) of such quotations. If fewer than two quotations are provided, Three-month LIBOR with respect to that Dividend Period will be the arithmetic mean (rounded upward if necessary to the nearest whole multiple of 0.00001%) of the rates quoted by three major banks in New York City selected by the Calculation Agent (after consultation with the Company), at approximately 11:00 a.m., New York City time, on the LIBOR Determination Date for that Dividend Period for loans in United States dollars to leading European banks for a three-month period commencing on the first day of that Dividend Period and in a principal amount of not less than $1 million. However, if fewer than three banks selected by the Calculation Agent to provide quotations are quoting as described above, Three-month LIBOR for that Dividend Period will be the same Three-month LIBOR as determined for the previous Dividend Period or, in the case of the Dividend Period beginning on April 30, 2018, 2.920%. The determination of Three-month LIBOR for each relevant Dividend Period by the Calculation Agent will (in the absence of manifest error) be final and binding.
“Transfer Agent” means The Bank of New York Mellon acting as Transfer Agent, Calculation Agent, Registrar and paying agent for the Series E Preferred Stock, and its successors and assigns.
“Trust” shall have the meaning set forth in Section 6(d).
Section 4. Dividends.
(a) Rate. Holders shall be entitled to receive, if, as and when declared by the Board of Directors, the Preferred Stock Committee or any other duly authorized committee of the Board of Directors, but only out of assets legally available therefor, non-cumulative cash dividends on the liquidation preference of $25,000 per share of Series E Preferred Stock, and no more, payable (i) semi-annually in arrears on each April 30 and October 30 from the date of issuance to, but excluding, April 30, 2018, and (ii) quarterly in arrears on each January 30, April 30, July 30, and October 30 from and including April 30, 2018; provided, however, if any such day is not a Business Day, then payment of any dividend otherwise payable on that date will be made on the next succeeding day that is a Business Day (i) on or prior to April 30, 2018, without any interest or other payment in respect of such delay, and (ii) after April 30, 2018, with dividends accruing to the actual payment date (each such day on which dividends are payable a “Dividend Payment Date”). The period from and including the date of issuance of the Series E Preferred Stock or any Dividend Payment Date to, but excluding, the next Dividend Payment Date is a “Dividend Period.” Dividends on each share of Series E Preferred Stock will accrue on the liquidation preference of $25,000 per share at a rate per annum equal to (i) 8.40%, for each Dividend Period from and including the date of issuance to, but excluding, April 30, 2018 and (ii) the greater of (x) Three-month LIBOR plus 4.0285% and (y) 7.7575%, for each Dividend Period from and including April 30, 2018. The record date for payment of dividends on the Series E Preferred Stock will be the fifteenth day of the calendar month immediately preceding the month during which the Dividend Payment Date falls or such other record date fixed by the Board of Directors, the Preferred Stock Committee or any other duly authorized committee thereof that is not more than 30 nor less than 10 days prior to such Dividend Payment Date (each, a “Dividend Record Date”). Any such day that is a Dividend Record Date will be a Dividend Record Date whether or not such day is a Business Day. The amount of dividends payable on or prior to April 30, 2018 will be computed on the basis of a 360-day year of twelve 30-day months. The amount of dividends payable after April 30, 2018 will be computed on the basis of a 360-day year and the actual number of days elapsed.
(b) Non-Cumulative Dividends. If the Board of Directors, the Preferred Stock Committee or any other duly authorized committee thereof does not declare a dividend on the Series E Preferred Stock for any Dividend Period prior to the related Dividend Payment Date, that dividend will not accrue, and the Company will have no obligation to pay, and Holders shall have no right to receive, a dividend for that Dividend Period on the related Dividend Payment Date or at any future time, whether or not dividends on the Series E Preferred Stock or any other series of preferred stock or common stock are declared for any subsequent Dividend Period with respect to Series E Preferred Stock, Parity Stock, Junior Stock or any other class or series of authorized preferred stock of the Company. References herein to the “accrual” of dividends refer only to the determination of the amount of such dividend and do not imply that any right to a dividend arises prior to the date on which a dividend is declared.
(c) Priority of Dividends. So long as any share of Series E Preferred Stock remains outstanding, unless as to a Dividend Payment Date full dividends on all outstanding shares of the Series E Preferred Stock have been declared and paid or declared and a sum sufficient for the payment of those dividends has been set aside for the Dividend Period then ending, the Company will not, and will cause its subsidiaries not to, during the next succeeding Dividend Period that commences on such Dividend Payment Date, declare or pay any dividend on, make any distributions relating to, or redeem, purchase, acquire or make a liquidation payment relating to, any Junior Stock, or make any guarantee payment with respect thereto, other than:
(i) purchases, redemptions or other acquisitions of shares of Junior Stock in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of employees, officers, directors or consultants;
(ii) purchases of shares of Common Stock pursuant to a contractually binding requirement to buy stock existing prior to the commencement of the then-current dividend period, including under a contractually binding stock repurchase plan;
(iii) as a result of an exchange or conversion of any class or series of Junior Stock for any other class or series of Junior Stock;
(iv) the purchase of fractional interests in shares of Junior Stock pursuant to the conversion or exchange provisions of such Junior Stock or the security being converted or exchanged;
(v) the purchase of Junior Stock by an investment banking subsidiary of the Company in connection with the distribution thereof; or
(vi) the purchase of Junior Stock by any investment banking subsidiary of the Company in connection with market-making or other secondary market activities in the ordinary course of the business of such subsidiary.
The foregoing restriction, however, will not apply to any Junior Stock dividends paid by the Company where the dividend stock is the same stock as that on which the dividend is being paid.
Except as provided below, for so long as any share of Series E Preferred Stock remains outstanding, if dividends are not declared and paid in full upon the shares of Series E Preferred Stock and any Parity Stock, all dividends declared upon shares of Series E Preferred Stock and any Parity Stock will be declared on a proportional basis so that the amount of dividends declared per share will bear to each other the same ratio that accrued dividends for the then-current Dividend Period per share of Series E Preferred Stock and accrued dividends for the then-current Dividend Period per share of any Parity Stock (including, in the case of any such Parity Stock that bears cumulative dividends, all accrued and unpaid dividends) bear to each other.
Subject to the foregoing, and not otherwise, such dividends payable in cash, stock or otherwise, as may be determined by the Board of Directors, the Preferred Stock Committee or any other duly authorized committee thereof, may be declared and paid on any Junior Stock and Parity Stock from time to time out of any assets legally available for such payment, and Holders will not be entitled to participate in those dividends.
Section 5. Liquidation Rights.
(a) Liquidation. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company, Holders shall be entitled, out of assets legally available therefor, before any distribution or payment out of the assets of the Company may be made to or set aside for the holders of any Junior Stock and subject to the rights of the holders of any class or series of securities ranking senior to or on parity with Series E Preferred Stock upon liquidation and the rights of the Company’s depositors and other creditors, to receive in full a liquidating distribution in the amount of the liquidation preference of $25,000 per share, plus any accrued dividends thereon from the last dividend payment date to, but excluding, the date of the liquidation, dissolution or winding up if and to the extent declared. Holders shall not be entitled to any further payments in the event of any such voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company other than what is expressly provided for in this Section 5.
(b) Partial Payment. If the assets of the Company are not sufficient to pay in full the liquidation preference plus any dividends which have been declared but not yet paid to all Holders and all holders of any Parity Stock, the amounts paid to the Holders and to the holders of all Parity Stock shall be pro rata in accordance with the respective aggregate liquidating distributions to which they would otherwise be entitled.
(c) Residual Distributions. If the respective aggregate liquidating distributions to which all Holders and all holders of any Parity Stock are entitled have been paid, the holders of Junior Stock shall be entitled to receive all remaining assets of the Company according to their respective rights and preferences.
(d) Merger, Consolidation and Sale of Assets Not Liquidation. For purposes of this Section 5, the sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the property and assets of the Company shall not be deemed a voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, nor shall the merger, consolidation or any other business combination transaction of the Company into or with any other corporation or person or the merger, consolidation or any other business combination transaction of any other corporation or person into or with the Company be deemed to be a voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company.
Section 6. Redemption.
(a) Optional Redemption. The Company, at the option of its Board of Directors, the Preferred Stock Committee or any other duly authorized committee thereof, may redeem out of funds legally available therefor, in whole or in part, the shares of Series E Preferred Stock at the time outstanding, on any Dividend Payment Date on or after April 30, 2018 as to which the Company has declared a dividend in full on the Series E Preferred Stock, upon notice given as provided in Section 6(b) below, and at a redemption price equal to $25,000 per share; provided, however, that the Company may not effect a partial redemption of the Series E Preferred Stock unless at least 2,000 shares ($50,000,000 aggregate liquidation amount) of Series E Preferred Stock, excluding shares of Series E Preferred Stock held by the Company or its subsidiaries, remain outstanding after giving effect to such partial redemption.
(b) Notice of Redemption. Notice of every redemption of shares of Series E Preferred Stock shall be mailed by first class mail, postage prepaid, addressed to the Holders of such shares to be redeemed at their respective last addresses appearing on the stock register of the Company. Such mailing shall be at least 30 days and not more than 60 days before the date
fixed for redemption. Any notice mailed as provided in this Section 6(b) shall be conclusively presumed to have been duly given, whether or not the Holder receives such notice, but failure duly to give such notice by mail, or any defect in such notice or in the mailing thereof, to any Holder of shares of Series E Preferred Stock designated for redemption shall not affect the validity of the proceedings for the redemption of any other shares of Series E Preferred Stock. Each notice shall state:
(i) the redemption date;
(ii) the number of shares of Series E Preferred Stock to be redeemed and, if fewer than all the shares of a Holder are to be redeemed, the number of such shares to be redeemed;
(iii) the redemption price;
(iv) the place or places where the certificates for such shares are to be surrendered for payment of the redemption price; and
(v) that dividends on the shares to be redeemed will cease to accrue on the redemption date.
Notwithstanding the foregoing, if the Series E Preferred Stock is held in book-entry form through DTC, the Company may give such notice in any manner permitted by DTC.
(c) Partial Redemption. In case of any redemption of only part of the shares of Series E Preferred Stock at the time outstanding, the shares of Series E Preferred Stock to be redeemed shall be selected pro rata from the Holders in proportion to the number of shares of Series E Preferred Stock held by such Holders, by lot or in such other manner as the Board of Directors, the Preferred Stock Committee or any other duly authorized committee thereof may determine to be fair and equitable. Subject to the provisions of this Section 6, the Board of Directors, the Preferred Stock Committee or any other duly authorized committee thereof shall have full power and authority to prescribe the terms and conditions upon which shares of Series E Preferred Stock shall be redeemed from time to time.
(d) Effectiveness of Redemption. If notice of redemption has been duly given and if on or before the redemption date specified in the notice all funds necessary for the redemption have been set aside by the Company, separate and apart from its other assets, in trust for the pro rata benefit of the Holders of the shares called for redemption, so as to be and continue to be available therefor, or deposited by the Company with a bank or trust company selected by the Board of Directors, the Preferred Stock Committee or any other duly authorized committee thereof (the “Trust”) in trust for the pro rata benefit of the Holders of the shares called for redemption, then, notwithstanding that any certificate for any share so called for redemption has not been surrendered for cancellation, on and after the redemption date all shares so called for redemption shall cease to be outstanding, all dividends with respect to such shares shall cease to accrue on such redemption date, and all rights with respect to such shares shall forthwith on such redemption date cease and terminate, except only the right of the Holders thereof to receive the amount payable on such redemption from the Trust at any time after the redemption date from the funds so deposited, without interest. The Company shall be entitled to receive, from time to time, from the Trust any interest accrued on such funds, and the Holders of any shares called for redemption shall have no claim to any such interest. Any funds so deposited and unclaimed at the end of three years from the redemption date shall, to the extent permitted by law, be released or repaid to the Company, and in the event of such repayment to the Company, the Holders of the shares so called for redemption shall be deemed to be unsecured creditors of the Company for an amount equivalent to the amount deposited as stated above for the redemption of such shares and so repaid to the Company, but shall in no event be entitled to any interest.
Section 7. Voting Rights.
(a) General. The Holders shall not be entitled to vote on any matter except as set forth in Section 7(b) below or as required by Delaware law.
(b) Special Voting Right.
(i) Voting Right. If and whenever dividends on the Series E Preferred Stock or any other class or series of preferred stock that ranks on parity with Series E Preferred Stock as to payment of dividends, and upon which voting rights equivalent to those granted by this Section 7(b)(i) have been conferred and are exercisable, have not been paid in an aggregate amount equal, as to any class or series, to at least three semi-annual or six quarterly Dividend Periods (whether consecutive or not) (a “Nonpayment”), the number of directors constituting the Board of Directors shall be increased by two, and the Holders (together with holders of any class or series of the
Company’s authorized preferred stock having equivalent voting rights), shall have the right, voting separately as a single class without regard to class or series (and with voting rights allocated pro rata based on the liquidation preference of each such class or series), to the exclusion of the holders of Common Stock, to elect two directors of the Company to fill such newly created directorships (and to fill any vacancies in the terms of such directorships), provided that the Holders and the holders of any such other class or series shall not be entitled to elect such directors to the extent such election would cause the Company to violate the corporate governance requirements of the New York Stock Exchange (or other exchange on which the Company’s securities may be listed) that listed companies must have a majority of independent directors and further provided that the Board of Directors shall at no time include more than two such directors. Each such director elected by the Holders and any other class or series of preferred stock that ranks on parity with the Series E Preferred Stock as to payment of dividends and having equivalent voting rights is a “Preferred Stock Director.”
(ii) Election. The election of the Preferred Stock Directors will take place at any annual meeting of stockholders or any special meeting of the Holders and any other class or series of stock of the Company that ranks on parity with Series E Preferred Stock as to payment of dividends and having equivalent voting rights and for which dividends have not been paid, called as provided herein. At any time after the special voting power has vested pursuant to Section 7(b)(i) above, the secretary of the Company may, and upon the written request of the Holders of at least 20% of the Series E Preferred Stock or the holders of at least 20% of such other series (addressed to the secretary at the Company’s principal office) must (unless such request is received less than 90 days before the date fixed for the next annual or special meeting of the stockholders, in which event such election shall be held at such next annual or special meeting of stockholders), call a special meeting of the Holders and any other class or series of preferred stock that ranks on parity with Series E Preferred Stock as to payment of dividends and having equivalent voting rights and for which dividends have not been paid for the election of the two directors to be elected by them as provided in Section 7(b)(iii) below. The Preferred Stock Directors shall each be entitled to one vote per director on any matter.
(iii) Notice of Special Meeting. Notice for a special meeting will be given in a similar manner to that provided in the Company’s by-laws for a special meeting of the stockholders. If the secretary of the Company does not call a special meeting within 20 days after receipt of any such request, then any Holder may (at the expense of the Company) call such meeting, upon notice as provided in this Section 7(b)(iii), and for that purpose will have access to the stock register of the Company. The Preferred Stock Directors elected at any such special meeting will hold office until the next annual meeting of the stockholders of the Company unless they have been previously terminated or removed pursuant to Section 7(b)(iv). In case any vacancy in the office of a Preferred Stock Director occurs (other than prior to the initial election of the Preferred Stock Directors), the vacancy may be filled by the written consent of the Preferred Stock Director remaining in office, or if none remains in office, by the vote of the Holders (together with holders of any other class of the Company’s authorized preferred stock having equivalent voting rights, whether or not the holders of such preferred stock would be entitled to vote for the election of directors if such default in dividends did not exist) to serve until the next annual meeting of the stockholders.
(iv) Termination; Removal. Whenever the Company has paid full dividends for at least two consecutive semi-annual or four consecutive quarterly dividend periods following a Nonpayment on the Series E Preferred Stock and any other class or series of non-cumulative preferred stock ranking on parity with Series E Preferred Stock as to payment of dividends, if any, and has paid cumulative dividends in full on any class or series of cumulative preferred stock ranking on parity with the Series E Preferred Stock as to payment of dividends (in each case, upon which equivalent voting rights to those set forth in Section 7(b)(iii) have been conferred and are exercisable), then the right of the Holders to elect the Preferred Stock Directors will cease (but subject always to the same provisions for the vesting of the special voting rights in the case of any similar nonpayment of dividends in respect of future Dividend Periods). The terms of office of the Preferred Stock Directors will immediately terminate, and the number of directors constituting the Board of Directors will be reduced accordingly. Any Preferred Stock Director may be removed at any time without cause by the Holders of a majority of the outstanding shares of the Series E Preferred Stock (together with holders of any other class of the Company’s authorized preferred stock having equivalent voting rights, whether or not the holders of such preferred stock would be entitled to vote for the election of directors if such default in dividends did not exist) when they have the voting rights described in this Section 7(b).
(c) Senior Issuances; Adverse Changes. So long as any shares of Series E Preferred Stock are outstanding, the vote or consent of the Holders of at least two-thirds of the shares of Series E Preferred Stock at the time outstanding, voting as a class with all other series of preferred stock ranking equally with the Series E Preferred Stock and entitled to vote thereon, given in person or by proxy, either in writing without a meeting or by vote at any meeting called for the purpose,
will be necessary for effecting or validating any of the following actions, whether or not such approval is required by Delaware law:
(i) any amendment, alteration or repeal of any provision of the Company’s Certificate of Incorporation (including the certificate of designation creating the Series E Preferred Stock) or the Company’s by-laws that would alter or change the voting powers, preferences or special rights of the Series E Preferred Stock so as to affect them adversely;
(ii) any amendment or alteration of the Company’s certificate of incorporation to authorize or create, or increase the authorized amount of, any shares of, or any securities convertible into shares of, any class or series of the Company’s capital stock ranking prior to the Series E Preferred Stock in the payment of dividends or in the distribution of assets on any liquidation, dissolution or winding-up of the Company; or
(iii) the consummation of a binding share exchange or reclassification involving the Series E Preferred Stock or a merger or consolidation of the Company with another entity, except that holders of Series E Preferred Stock will have no right to vote under this provision or otherwise under Delaware law if in each case (i) the Series E Preferred Stock remains outstanding or, in the case of any such merger or consolidation with respect to which the Company is not the surviving or resulting entity, is converted into or exchanged for preferred securities of the surviving or resulting entity or its ultimate parent, that is an entity organized and existing under the laws of the United States of America, any state thereof or the District of Columbia and that is a corporation for U.S. federal income tax purposes (or if such entity is not a corporation, the Company having received an opinion of nationally recognized counsel experienced in such matters to the effect that Holders will be subject to tax for U.S. federal income tax purposes with respect to such new preferred securities after such merger or consolidation in the same amount, at the same time and otherwise in the same manner as would have been the case under the Series E Preferred Stock prior to such merger or consolidation), and (ii) such Series E Preferred Stock remaining outstanding or such preferred securities, as the case may be, have such rights, preferences, privileges and voting powers, taken as a whole, as are not materially less favorable to the holders thereof than the rights, preferences, privileges and voting powers of the Series E Preferred Stock, taken as a whole;
provided, however, that any increase in the amount of the authorized or issued Series E Preferred Stock or authorized preferred stock or any securities convertible into preferred stock or the creation and issuance, or an increase in the authorized or issued amount, of other series of preferred stock or any securities convertible into preferred stock ranking equally with and/or junior to the Series E Preferred Stock with respect to the payment of dividends (whether such dividends are cumulative or non-cumulative) and/or the distribution of assets upon the Company’s liquidation, dissolution or winding up will not be deemed to adversely affect the voting powers, preferences or special rights of the Series E Preferred Stock and Holders will have no right to vote on such an increase, creation or issuance.
If any amendment, alteration, repeal, share exchange, reclassification, merger or consolidation specified in this Section 7(c) would adversely affect one or more but not all series of preferred stock of the Company, then only such series of preferred stock as are adversely affected by and entitled to vote on the matter shall vote on the matter together as a single class (in lieu of all other series of preferred stock).
(d) No Vote if Redemption. No vote or consent of the Holders shall be required pursuant to Section 7(b) or (c) if, at or prior to the time when the act with respect to such vote or consent would otherwise be required shall be effected, the Company shall have redeemed or shall have called for redemption all outstanding shares of Series E Preferred Stock, with proper notice and sufficient funds having been set aside for such redemption, in each case pursuant to Section 6 above.
Section 8. Preemption and Conversion Rights.
The Holders shall not have any rights of preemption or conversion.
Section 9. Rank.
Notwithstanding anything set forth in the Certificate of Incorporation or this Certificate of Designation to the contrary, the Board of Directors, the Preferred Stock Committee or any other duly authorized committee thereof, without the vote of the Holders, may authorize and issue additional shares of Junior Stock or Parity Stock.
Section 10. Repurchase.
Subject to the limitations imposed herein, the Company may purchase and sell Series E Preferred Stock from time to time to such extent, in such manner, and upon such terms as the Board of Directors, the Preferred Stock Committee or any other duly authorized committee thereof may determine; provided, however, that the Company shall not use any of its funds for any such purchase when there are reasonable grounds to believe that the Company is, or by such purchase would be, rendered insolvent; provided, further, however, that in the event that the Company beneficially owns any Series E Preferred Stock, the Company will procure that voting rights in respect of such Series E Preferred Stock are not exercised.
Section 11. Unissued or Reacquired Shares.
Shares of Series E Preferred Stock not issued or which have been issued and redeemed or otherwise purchased or acquired by the Company shall be restored to the status of authorized but unissued shares of preferred stock without designation as to series.
Section 12. No Sinking Fund.
Shares of Series E Preferred Stock are not subject to the operation of a sinking fund.
Section 13. Transfer Agent, Calculation Agent, Registrar and Paying Agent.
The duly appointed Transfer Agent, Calculation Agent, Registrar and paying agent for the Series E Preferred Stock shall be The Bank of New York Mellon. The Company may, in its sole discretion, remove the Transfer Agent in accordance with the agreement between the Company and the Transfer Agent; provided that the Company shall appoint a successor transfer agent who shall accept such appointment prior to the effectiveness of such removal. Upon any such removal or appointment, the Company shall send notice thereof by first-class mail, postage prepaid, to the Holders.
Section 14. Replacement Certificates.
Mutilated, Destroyed, Stolen and Lost Certificates. If physical certificates are issued, the Company shall replace any mutilated certificate at the Holder’s expense upon surrender of that certificate to the Transfer Agent. The Company shall replace certificates that become destroyed, stolen or lost at the Holder’s expense upon delivery to the Company and the Transfer Agent of satisfactory evidence that the certificate has been destroyed, stolen or lost, together with any indemnity that may be required by the Transfer Agent and the Company.
Section 15. Form.
(a) Global Series E Preferred Stock. Series E Preferred Stock may be issued in the form of one or more permanent global shares of Series E Preferred Stock in definitive, fully registered form with a global legend in substantially the form attached hereto as Exhibit A (each, a “Global Series E Preferred Stock”), which is hereby incorporated in and expressly made a part of this Certificate of Designation. The Global Series E Preferred Stock may have notations, legends or endorsements required by law, stock exchange rules, agreements to which the Company is subject, if any, or usage (provided that any such notation, legend or endorsement is in a form acceptable to the Company). The aggregate number of shares represented by each Global Series E Preferred Stock may from time to time be increased or decreased by adjustments made on the records of the Registrar and the Depositary or its nominee as hereinafter provided. This Section 15(a) shall apply only to a Global Series E Preferred Stock deposited with or on behalf of the Depositary.
(b) Delivery to Depositary. If Global Series E Preferred Stock is issued, the Company shall execute and the Registrar shall, in accordance with this Section, countersign and deliver initially one or more Global Series E Preferred Stock that (i) shall be registered in the name of Cede & Co. or other nominee of the Depositary and (ii) shall be delivered by the Registrar to the Depositary or pursuant to instructions received from the Depositary or held by the Registrar as custodian for the Depositary pursuant to an agreement between the Depositary and the Registrar.
(c) Agent Members. If Global Series E Preferred Stock is issued, members of, or participants in, the Depositary (“Agent Members”) shall have no rights under this Certificate of Designation with respect to any Global Series E Preferred Stock held on their behalf by the Depositary or by the Registrar as the custodian of the Depositary or under such Global Series E Preferred Stock, and the Depositary may be treated by the Company, the Registrar and any agent of the Company or the Registrar as the absolute owner of such Global Series E Preferred Stock for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Registrar or any agent of the Company or the Registrar from giving effect to any written certification, proxy or other authorization furnished by the Depositary or impair, as between the Depositary and its Agent Members, the operation of customary practices of the Depositary governing the exercise of the rights of a holder of a beneficial interest in any Global Series E Preferred Stock. If Global Series E Preferred Stock is issued, the Depositary may grant proxies or otherwise authorize any Person to take any action
that a Holder is entitled to take pursuant to the Series E Preferred Stock, this Certificate of Designation or the Certificate of Incorporation.
(d) Physical Certificates. Owners of beneficial interests in any Global Series E Preferred Stock shall not be entitled to receive physical delivery of certificated shares of Series E Preferred Stock, unless (x) the Depositary has notified the Company that it is unwilling or unable to continue as Depositary for the Global Series E Preferred Stock and the Company does not appoint a qualified replacement for the Depositary within 90 days, (y) the Depositary ceases to be a “clearing agency” registered under the Exchange Act and the Company does not appoint a qualified replacement for the Depositary within 90 days or (z) the Company decides to discontinue the use of book-entry transfer through the Depositary. In any such case, the Global Series E Preferred Stock shall be exchanged in whole for definitive shares of Series E Preferred Stock in registered form, with the same terms and of an equal aggregate Liquidation Preference. Such definitive shares of Series E Preferred Stock shall be registered in the name or names of the Person or Persons specified by the Depositary in a written instrument to the Registrar.
(e) Signature. An Officer shall sign any Global Series E Preferred Stock for the Company, in accordance with the Company’s by-laws and applicable law, by manual or facsimile signature. If an Officer whose signature is on a Global Series E Preferred Stock no longer holds that office at the time the Transfer Agent countersigned the Global Series E Preferred Stock, the Global Series E Preferred Stock shall be valid nevertheless. A Global Series E Preferred Stock shall not be valid until an authorized signatory of the Transfer Agent manually countersigns Global Series E Preferred Stock. Each Global Series E Preferred Stock shall be dated the date of its countersignature.
Section 16. Taxes.
(a) Transfer Taxes. The Company shall pay any and all stock transfer, documentary, stamp and similar taxes that may be payable in respect of any issuance or delivery of shares of Series E Preferred Stock or shares of Common Stock or other securities issued on account of Series E Preferred Stock pursuant hereto or certificates representing such shares or securities. The Company shall not, however, be required to pay any such tax that may be payable in respect of any transfer involved in the issuance or delivery of shares of Series E Preferred Stock, shares of Common Stock or other securities in a name other than that in which the shares of Series E Preferred Stock with respect to which such shares or other securities are issued or delivered were registered, or in respect of any payment to any Person other than a payment to the registered holder thereof, and shall not be required to make any such issuance, delivery or payment unless and until the Person otherwise entitled to such issuance, delivery or payment has paid to the Company the amount of any such tax or has established, to the satisfaction of the Company, that such tax has been paid or is not payable.
(b) Withholding. All payments and distributions (or deemed distributions) on the shares of Series E Preferred Stock shall be subject to withholding and backup withholding of tax to the extent required by law, subject to applicable exemptions, and amounts withheld, if any, shall be treated as received by Holders.
Section 17. Notices.
All notices referred to herein shall be in writing, and, unless otherwise specified herein, all notices hereunder shall be deemed to have been given upon the earlier of receipt thereof or three Business Days after the mailing thereof if sent by registered or certified mail (unless first class mail shall be specifically permitted for such notice under the terms of this Certificate of Designation) with postage prepaid, addressed: (i) if to the Company, to its office at 399 Park Avenue, New York, New York 10043 (Attention: Corporate Secretary) or to the Transfer Agent at its office at 480 Washington Boulevard, 29th Floor, Jersey City, New Jersey 07310 (Attention: Corporate Trust Office), or other agent of the Company designated as permitted by this Certificate of Designation, or (ii) if to any Holder, to such Holder at the address of such Holder as listed in the stock record books of the Company (which may include the records of the Transfer Agent) or (iii) to such other address as the Company or any such Holder, as the case may be, shall have designated by notice similarly given.
Exhibit A
FORM OF % FIXED RATE / FLOATING RATE NON-CUMULATIVE PREFERRED STOCK, SERIES E FACE OF SECURITY
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO. HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR’S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE CERTIFICATE OF DESIGNATION REFERRED TO BELOW.
| Certificate Number | Number of Shares of Series E Preferred Stock |
|---|---|
| CUSIP NO.: |
CITIGROUP INC.
% Fixed Rate / Floating Rate Non-Cumulative Preferred Stock, Series E (par value $1.00 per share) (liquidation preference $25,000 per share)
Citigroup Inc., a Delaware corporation (the “Company”), hereby certifies that [ ] (the “Holder”) is the registered owner of [ ] fully paid and non-assessable shares of the Company’s designated % Fixed Rate / Floating Rate Non-Cumulative Preferred Stock, Series E, with a par value of $1.00 per share and a liquidation preference of $25,000 per share (the “Series E Preferred Stock”). The shares of Series E Preferred Stock are transferable on the books and records of the Registrar, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer. The designations, rights, privileges, restrictions, preferences and other terms and provisions of the Series E Preferred Stock represented hereby are and shall in all respects be subject to the provisions of the Certificate of Designation dated April 25, 2008 as the same may be amended from time to time (the “Certificate of Designation”). Capitalized terms used herein but not defined shall have the meaning given them in the Certificate of Designation. The Company will provide a copy of the Certificate of Designation to a Holder without charge upon written request to the Company at its principal place of business.
Reference is hereby made to select provisions of the Series E Preferred Stock set forth on the reverse hereof, and to the Certificate of Designation, which select provisions and the Certificate of Designation shall for all purposes have the same effect as if set forth at this place.
Upon receipt of this certificate, the Holder is bound by the Certificate of Designation and is entitled to the benefits thereunder.
Unless the Registrar has properly countersigned, these shares of Series E Preferred Stock shall not be entitled to any benefit under the Certificate of Designation or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, this certificate has been executed on behalf of the Company by its [Title] this day of , .
| CITIGROUP INC. |
|---|
| By: |
| Name: |
| Title: |
REGISTRAR’S COUNTERSIGNATURE
These are shares of Series E Preferred Stock referred to in the within-mentioned Certificate of Designation.
Dated:
| THE BANK OF NEW YORK MELLON, as Registrar |
|---|
| By: |
| Name: |
| Title: |
REVERSE OF CERTIFICATE
Dividends on each share of Series E Preferred Stock shall be payable at the rate provided in the Certificate of Designation.
The shares of Series E Preferred Stock shall be redeemable at the option of the Company in the manner and in accordance with the terms set forth in the Certificate of Designation.
The Company shall furnish without charge to each holder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class or series of share capital issued by the Company and the qualifications, limitations or restrictions of such preferences and/or rights.
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers the shares of Series E Preferred Stock evidenced hereby to:
________________________________________________________________
________________________________________________________________
(Insert assignee’s social security or taxpayer identification number, if any)
________________________________________________________________
________________________________________________________________
(Insert address and zip code of assignee) and irrevocably appoints:
________________________________________________________________
________________________________________________________________
as agent to transfer the shares of Series E Preferred Stock evidenced hereby on the books of the Transfer Agent. The agent may substitute another to act for him or her.
| Date: |
|---|
| Signature: |
________________________________________________________________
| (Sign exactly as your name appears on the other side of this Certificate) |
|---|
| Signature Guarantee: |
(Signature must be guaranteed by an “eligible guarantor institution” that is a bank, stockbroker, savings and loan association or credit union meeting the requirements of the Transfer Agent, which requirements include membership or participation in the Securities Transfer Agents Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Transfer Agent in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.)
Exhibit III
8.50% Non-Cumulative Preferred Stock, Series F
Section 1. Designation.
The designation of the series of preferred stock shall be “8.50% Non-Cumulative Preferred Stock, Series F” (the “Series F Preferred Stock”). Each share of Series F Preferred Stock shall be identical in all respects to every other share of Series F Preferred Stock. Series F Preferred Stock will rank equally with Parity Stock, will rank senior to Junior Stock and will rank junior to Senior Stock, if any, with respect to the payment of dividends and/or the distribution of assets in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company.
Section 2. Number of Shares.
The number of authorized shares of Series F Preferred Stock shall be 92,000. That number from time to time may be increased (but not in excess of the total number of authorized shares of preferred stock) or decreased (but not below the number of shares of Series F Preferred Stock then outstanding) by further resolution duly adopted by the Board of Directors, the Preferred Stock Committee or any other duly authorized committee thereof and by the filing of a certificate pursuant to the provisions of the General Corporation Law of the State of Delaware stating that such increase or reduction, as the case may be, has been so authorized. The Company shall have the authority to issue fractional shares of Series F Preferred Stock.
Section 3. Definitions. As used herein with respect to Series F Preferred Stock:
“Agent Members” has the meaning set forth in Section 15(c).
“Board of Directors” has the meaning set forth in the recitals above.
“Business Day” means any weekday that is not a legal holiday in New York City and is not a day on which banking institutions in New York City are authorized or required by law or regulation to be closed.
“Common Stock” means the common stock of the Company, par value $0.01 per share, or any other shares of the capital stock of the Company into which such shares of common stock shall be reclassified or changed.
“Depositary” means DTC or its nominee or any successor depositary appointed by the Company.
“Dividend Payment Date” shall have the meaning set forth in Section 4(a) hereof.
“Dividend Period” shall have the meaning set forth in Section 4(a) hereof.
“Dividend Record Date” shall have the meaning set forth in Section 4(a) hereof.
“DTC” means The Depository Trust Company.
“Global Series F Preferred Stock” has the meaning set forth in Section 15(a).
“Holder” means the Person in whose name the shares of the Series F Preferred Stock are registered, which may be treated by the Company, Transfer Agent, Registrar and paying agent as the absolute owner of the shares of Series F Preferred Stock for the purpose of making payment and for all other purposes.
“Junior Stock” means the Common Stock and any other class or series of stock of the Company now existing or hereafter authorized over which Series F Preferred Stock has preference or priority in the payment of dividends or in the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the Company.
“Nonpayment” shall have the meaning set forth in Section 7(b)(i) hereof.
“Officer” means the Chief Executive Officer, the Chairman, the Chief Administrative Officer, any Vice Chairman, the Chief Financial Officer, the Controller, the Chief Accounting Officer, the Treasurer and Head of Corporate Finance, any Assistant Treasurer, the General Counsel and Corporate Secretary and any Assistant Secretary of the Company.
“Parity Stock” means any class or series of stock of the Company now existing or hereafter authorized that ranks equally with the Series F Preferred Stock in the payment of dividends and in the distribution of assets on any liquidation, dissolution or winding up of the Company.
“Person” means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint-stock company, limited liability company or trust.
“Preferred Stock Director” shall have the meaning set forth in Section 7(b)(i) hereof.
“Registrar” means the Transfer Agent acting in its capacity as registrar for the Series F Preferred Stock, and its successors and assigns.
“Senior Stock” means any class or series of stock of the Company now existing or hereafter authorized which has preference or priority over the Series F Preferred Stock as to the payment of dividends or in the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the Company.
“Series F Preferred Stock” shall have the meaning set forth in Section 1 hereof.
“Transfer Agent” means The Bank of New York Mellon acting as Transfer Agent, Registrar and paying agent for the Series F Preferred Stock, and its successors and assigns.
“Trust” shall have the meaning set forth in Section 6(d).
Section 4. Dividends.
(a) Rate. Holders shall be entitled to receive, if, as and when declared by the Board of Directors, the Preferred Stock Committee or any other duly authorized committee of the Board of Directors, but only out of assets legally available therefor, non-cumulative cash dividends on the liquidation preference of $25,000 per share of Series F Preferred Stock, and no more, payable quarterly in arrears on March 15, June 15, September 15 and December 15 of each year, beginning on June 15, 2008; provided, however, if any such day is not a Business Day, then payment of any dividend otherwise payable on that date will be made on the next succeeding day that is a Business Day, (without any interest or other payment in respect of such delay) (each such day on which dividends are payable a “Dividend Payment Date”). The period from and including the date of issuance of the Series F Preferred Stock or any Dividend Payment Date to, but excluding, the next Dividend Payment Date is a “Dividend Period.” Dividends on each share of Series F Preferred Stock will accrue on the liquidation preference of $25,000 per share at a rate per annum equal to 8.50%. The record date for payment of dividends on the Series F Preferred Stock will be the fifteenth day of the calendar month immediately preceding the month during which the Dividend Payment Date falls or such other record date fixed by the Board of Directors, the Preferred Stock Committee or any other duly authorized committee thereof that is not more than 30 nor less than 10 days prior to such Dividend Payment Date (each, a “Dividend Record Date”). Any such day that is a Dividend Record Date will be a Dividend Record Date whether or not such day is a Business Day. The amount of dividends payable will be computed on the basis of a 360-day year of twelve 30-day months.
(b) Non-Cumulative Dividends. If the Board of Directors, the Preferred Stock Committee or any other duly authorized committee thereof does not declare a dividend on the Series F Preferred Stock for any Dividend Period prior to the related Dividend Payment Date, that dividend will not accrue, and the Company will have no obligation to pay, and Holders shall have no right to receive, a dividend for that Dividend Period on the related Dividend Payment Date or at any future time, whether or not dividends on the Series F Preferred Stock or any other series of preferred stock or common stock are declared for any subsequent Dividend Period with respect to Series F Preferred Stock, Parity Stock, Junior Stock or any other class or series of authorized preferred stock of the Company. References herein to the “accrual” of dividends refer only to the determination of the amount of such dividend and do not imply that any right to a dividend arises prior to the date on which a dividend is declared.
(c) Priority of Dividends. So long as any share of Series F Preferred Stock remains outstanding, unless as to a Dividend Payment Date full dividends on all outstanding shares of the Series F Preferred Stock have been declared and paid or declared and a sum sufficient for the payment of those dividends has been set aside for the Dividend Period then ending, the Company will not, and will cause its subsidiaries not to, during the next succeeding Dividend Period that commences on such Dividend Payment Date, declare or pay any dividend on, make any distributions relating to, or redeem, purchase, acquire or make a liquidation payment relating to, any Junior Stock, or make any guarantee payment with respect thereto, other than:
(i) purchases, redemptions or other acquisitions of shares of Junior Stock in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of employees, officers, directors or consultants;
(ii) purchases of shares of Common Stock pursuant to a contractually binding requirement to buy stock existing prior to the commencement of the then-current dividend period, including under a contractually binding stock repurchase plan;
(iii) as a result of an exchange or conversion of any class or series of Junior Stock for any other class or series of Junior Stock;
(iv) the purchase of fractional interests in shares of Junior Stock pursuant to the conversion or exchange provisions of such Junior Stock or the security being converted or exchanged;
(v) the purchase of Junior Stock by an investment banking subsidiary of the Company in connection with the distribution thereof; or
(vi) the purchase of Junior Stock by any investment banking subsidiary of the Company in connection with market-making or other secondary market activities in the ordinary course of the business of such subsidiary.
The foregoing restriction, however, will not apply to any Junior Stock dividends paid by the Company where the dividend stock is the same stock as that on which the dividend is being paid.
Except as provided below, for so long as any share of Series F Preferred Stock remains outstanding, if dividends are not declared and paid in full upon the shares of Series F Preferred Stock and any Parity Stock, all dividends declared upon shares of Series F Preferred Stock and any Parity Stock will be declared on a proportional basis so that the amount of dividends declared per share will bear to each other the same ratio that accrued dividends for the then current Dividend Period per share of Series F Preferred Stock and accrued dividends for the then-current Dividend Period per share of any Parity Stock (including, in the case of any such Parity Stock that bears cumulative dividends, all accrued and unpaid dividends) bear to each other.
Subject to the foregoing, and not otherwise, such dividends payable in cash, stock or otherwise, as may be determined by the Board of Directors, the Preferred Stock Committee or any other duly authorized committee thereof, may be declared and paid on any Junior Stock and Parity Stock from time to time out of any assets legally available for such payment, and Holders will not be entitled to participate in those dividends.
Section 5. Liquidation Rights.
(a) Liquidation. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company, Holders shall be entitled, out of assets legally available therefor, before any distribution or payment out of the assets of the Company may be made to or set aside for the holders of any Junior Stock and subject to the rights of the holders of any class or series of securities ranking senior to or on parity with Series F Preferred Stock upon liquidation and the rights of the Company’s depositors and other creditors, to receive in full a liquidating distribution in the amount of the liquidation preference $25,000 per share, plus any accrued dividends thereon from the last dividend payment date to, but excluding, the date of the liquidation, dissolution or winding up if and to the extent declared. Holders shall not be entitled to any further payments in the event of any such voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company other than what is expressly provided for in this Section 5.
(b) Partial Payment. If the assets of the Company are not sufficient to pay in full the liquidation preference plus any dividends which have been declared but not yet paid to all Holders and all holders of any Parity Stock, the amounts paid to the Holders and to the holders of all Parity Stock shall be pro rata in accordance with the respective aggregate liquidating distributions to which they would otherwise be entitled.
(c) Residual Distributions. If the respective aggregate liquidating distributions to which all Holders and all holders of any Parity Stock are entitled have been paid, the holders of Junior Stock shall be entitled to receive all remaining assets of the Company according to their respective rights and preferences.
(d) Merger, Consolidation and Sale of Assets Not Liquidation. For purposes of this Section 5, the sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the property and assets of the Company shall not be deemed a voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, nor shall the merger, consolidation or any other business combination transaction of the
Company into or with any other corporation or person or the merger, consolidation or any other business combination transaction of any other corporation or person into or with the Company be deemed to be a voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company.
Section 6. Redemption.
(a) Optional Redemption. The Company, at the option of its Board of Directors, the Preferred Stock Committee or any other duly authorized committee thereof, may redeem out of funds legally available therefor, in whole or in part, the shares of Series F Preferred Stock at the time outstanding, on any Dividend Payment Date as to which the Company has declared a dividend in full on the Series F Preferred Stock on or after the Dividend Payment Date on June 15, 2013, upon notice given as provided in Section 6(b) below, and at a redemption price equal to $25,000 per share.
(b) Notice of Redemption. Notice of every redemption of shares of Series F Preferred Stock shall be mailed by first class mail, postage prepaid, addressed to the Holders of such shares to be redeemed at their respective last addresses appearing on the stock register of the Company. Such mailing shall be at least 30 days and not more than 60 days before the date fixed for redemption. Any notice mailed as provided in this Section 6(b) shall be conclusively presumed to have been duly given, whether or not the Holder receives such notice, but failure duly to give such notice by mail, or any defect in such notice or in the mailing thereof, to any Holder of shares of Series F Preferred Stock designated for redemption shall not affect the validity of the proceedings for the redemption of any other shares of Series F Preferred Stock. Each notice shall state:
(i) the redemption date;
(ii) the number of shares of Series F Preferred Stock to be redeemed and, if fewer than all the shares of a Holder are to be redeemed, the number of such shares to be redeemed;
(iii) the redemption price;
(iv) the place or places where the certificates for such shares are to be surrendered for payment of the redemption price; and
(v) that dividends on the shares to be redeemed will cease to accrue on the redemption date.
Notwithstanding the foregoing, if the Series F Preferred Stock is held in book-entry form through DTC, the Company may give such notice in any manner permitted by DTC.
(c) Partial Redemption. In case of any redemption of only part of the shares of Series F Preferred Stock at the time outstanding, the shares of Series F Preferred Stock to be redeemed shall be selected pro rata from the Holders in proportion to the number of shares of Series F Preferred Stock held by such Holders, by lot or in such other manner as the Board of Directors, the Preferred Stock Committee or any other duly authorized committee thereof may determine to be fair and equitable. Subject to the provisions of this Section 6, the Board of Directors, the Preferred Stock Committee or any other duly authorized committee thereof shall have full power and authority to prescribe the terms and conditions upon which shares of Series F Preferred Stock shall be redeemed from time to time.
(d) Effectiveness of Redemption. If notice of redemption has been duly given and if on or before the redemption date specified in the notice all funds necessary for the redemption have been set aside by the Company, separate and apart from its other assets, in trust for the pro rata benefit of the Holders of the shares called for redemption, so as to be and continue to be available therefor, or deposited by the Company with a bank or trust company selected by the Board of Directors, the Preferred Stock Committee or any other duly authorized committee thereof (the “Trust”) in trust for the pro rata benefit of the Holders of the shares called for redemption, then, notwithstanding that any certificate for any share so called for redemption has not been surrendered for cancellation, on and after the redemption date all shares so called for redemption shall cease to be outstanding, all dividends with respect to such shares shall cease to accrue on such redemption date, and all rights with respect to such shares shall forthwith on such redemption date cease and terminate, except only the right of the Holders thereof to receive the amount payable on such redemption from the Trust at any time after the redemption date from the funds so deposited, without interest. The Company shall be entitled to receive, from time to time, from the Trust any interest accrued on such funds, and the Holders of any shares called for redemption shall have no claim to any such interest. Any funds so deposited and unclaimed at the end of three years from the redemption date shall, to the extent permitted by law, be released or repaid to the Company, and in the event of such repayment to the Company, the Holders of the shares so called for redemption shall be deemed to be unsecured creditors of the
Company for an amount equivalent to the amount deposited as stated above for the redemption of such shares and so repaid to the Company, but shall in no event be entitled to any interest.
Section 7. Voting Rights.
(a) General. The Holders shall not be entitled to vote on any matter except as set forth in Section 7(b) below or as required by Delaware law.
(b) Special Voting Right.
(i) Voting Right. If and whenever dividends on the Series F Preferred Stock or any other class or series of preferred stock that ranks on parity with Series F Preferred Stock as to payment of dividends, and upon which voting rights equivalent to those granted by this Section 7(b)(i) have been conferred and are exercisable, have not been paid in an aggregate amount equal, as to any class or series, to at least six quarterly Dividend Periods (whether consecutive or not) (a “Nonpayment”), the number of directors constituting the Board of Directors shall be increased by two, and the Holders (together with holders of any class or series of the Company’s authorized preferred stock having equivalent voting rights), shall have the right, voting separately as a single class without regard to class or series (and with voting rights allocated pro rata based on the liquidation preference of each such class or series), to the exclusion of the holders of Common Stock, to elect two directors of the Company to fill such newly created directorships (and to fill any vacancies in the terms of such directorships), provided that the Holders and the holders of any such other class or series shall not be entitled to elect such directors to the extent such election would cause the Company to violate the corporate governance requirements of the New York Stock Exchange (or other exchange on which the Company’s securities may be listed) that listed companies must have a majority of independent directors and further provided that the Board of Directors shall at no time include more than two such directors. Each such director elected by the Holders and any other class or series of preferred stock that ranks on parity with the Series F Preferred Stock as to payment of dividends and having equivalent voting rights is a “Preferred Stock Director.”
(ii) Election. The election of the Preferred Stock Directors will take place at any annual meeting of stockholders or any special meeting of the Holders and any other class or series of stock of the Company that ranks on parity with Series F Preferred Stock as to payment of dividends and having equivalent voting rights and for which dividends have not been paid, called as provided herein. At any time after the special voting power has vested pursuant to Section 7(b)(i) above, the secretary of the Company may, and upon the written request of the Holders of at least 20% of the Series F Preferred Stock or the holders of at least 20% of such other series (addressed to the secretary at the Company’s principal office) must (unless such request is received less than 90 days before the date fixed for the next annual or special meeting of the stockholders, in which event such election shall be held at such next annual or special meeting of stockholders), call a special meeting of the Holders and any other class or series of preferred stock that ranks on parity with Series F Preferred Stock as to payment of dividends and having equivalent voting rights and for which dividends have not been paid for the election of the two directors to be elected by them as provided in Section 7(b)(iii) below. The Preferred Stock Directors shall each be entitled to one vote per director on any matter.
(iii) Notice of Special Meeting. Notice for a special meeting will be given in a similar manner to that provided in the Company’s by-laws for a special meeting of the stockholders. If the secretary of the Company does not call a special meeting within 20 days after receipt of any such request, then any Holder may (at the expense of the Company) call such meeting, upon notice as provided in this Section 7(b)(iii), and for that purpose will have access to the stock register of the Company. The Preferred Stock Directors elected at any such special meeting will hold office until the next annual meeting of the stockholders of the Company unless they have been previously terminated or removed pursuant to Section 7(b)(iv). In case any vacancy in the office of a Preferred Stock Director occurs (other than prior to the initial election of the Preferred Stock Directors), the vacancy may be filled by the written consent of the Preferred Stock Director remaining in office, or if none remains in office, by the vote of the Holders (together with holders of any other class of the Company’s authorized preferred stock having equivalent voting rights, whether or not the holders of such preferred stock would be entitled to vote for the election of directors if such default in dividends did not exist) to serve until the next annual meeting of the stockholders.
(iv) Termination; Removal. Whenever the Company has paid full dividends for at least four consecutive quarterly dividend periods following a Nonpayment on the Series F Preferred Stock and any other class or series of non-cumulative preferred stock ranking on parity with Series F Preferred Stock as to payment of dividends, if any, and has paid cumulative dividends in full on any class or series of cumulative preferred stock ranking on parity with the Series F Preferred Stock as to payment of dividends (in each case, upon which equivalent voting rights to those set forth in Section 7(b)(iii) have been conferred and are exercisable), then the right of the Holders to
elect the Preferred Stock Directors will cease (but subject always to the same provisions for the vesting of the special voting rights in the case of any similar non-payment of dividends in respect of future Dividend Periods). The terms of office of the Preferred Stock Directors will immediately terminate, and the number of directors constituting the Board of Directors will be reduced accordingly. Any Preferred Stock Director may be removed at any time without cause by the Holders of a majority of the outstanding shares of the Series F Preferred Stock (together with holders of any other class of the Company’s authorized preferred stock having equivalent voting rights, whether or not the holders of such preferred stock would be entitled to vote for the election of directors if such default in dividends did not exist) when they have the voting rights described in this Section 7(b).
(c) Senior Issuances; Adverse Changes. So long as any shares of Series F Preferred Stock are outstanding, the vote or consent of the Holders of at least two-thirds of the shares of Series F Preferred Stock at the time outstanding, voting as a class with all other series of preferred stock ranking equally with the Series F Preferred Stock and entitled to vote thereon, given in person or by proxy, either in writing without a meeting or by vote at any meeting called for the purpose, will be necessary for effecting or validating any of the following actions, whether or not such approval is required by Delaware law:
(i) any amendment, alteration or repeal of any provision of the Company’s Certificate of Incorporation (including the certificate of designation creating the Series F Preferred Stock) or the Company’s by-laws that would alter or change the voting powers, preferences or special rights of the Series F Preferred Stock so as to affect them adversely;
(ii) any amendment or alteration of the Company’s certificate of incorporation to authorize or create, or increase the authorized amount of, any shares of, or any securities convertible into shares of, any class or series of the Company’s capital stock ranking prior to the Series F Preferred Stock in the payment of dividends or in the distribution of assets on any liquidation, dissolution or winding-up of the Company; or
(iii) the consummation of a binding share exchange or reclassification involving the Series F Preferred Stock or a merger or consolidation of the Company with another entity, except that holders of Series F Preferred Stock will have no right to vote under this provision or otherwise under Delaware law if in each case (i) the Series F Preferred Stock remains outstanding or, in the case of any such merger or consolidation with respect to which the Company is not the surviving or resulting entity, is converted into or exchanged for preferred securities of the surviving or resulting entity or its ultimate parent that is an entity organized and existing under the laws of the United States of America, any state thereof or the District of Columbia and that is a corporation for U.S. federal income tax purposes (or if such entity is not a corporation the Company having received an opinion of nationally recognized counsel experienced in such matters to the effect that Holders will be subject to tax for U.S. federal income tax purposes with respect to such new preferred securities after such merger or consolidation in the same amount, at the same time and otherwise in the same manner as would have been the case under the Series F Preferred Stock prior to such merger or consolidation), and (ii) such Series F Preferred Stock remaining outstanding or such preferred securities, as the case may be, have such rights, preferences, privileges and voting powers, taken as a whole, as are not materially less favorable to the holders thereof than the rights, preferences, privileges and voting powers of the Series F Preferred Stock taken as a whole; provided, however, that any increase in the amount of the authorized or issued Series F Preferred Stock or authorized preferred stock or any securities convertible into preferred stock or the creation and issuance, or an increase in the authorized or issued amount, of other series of preferred stock or any securities convertible into preferred stock ranking equally with and/or junior to the Series F Preferred Stock with respect to the payment of dividends (whether such dividends are cumulative or non-cumulative) and/or the distribution of assets upon the Company’s liquidation, dissolution or winding up will not be deemed to adversely affect the voting powers, preferences or special rights of the Series F Preferred Stock and Holders will have no right to vote on such an increase, creation or issuance.
If any amendment, alteration, repeal, share exchange, reclassification, merger or consolidation specified in this Section 7(c) would adversely affect one or more but not all series of preferred stock of the Company, then only such series of preferred stock as are adversely affected by and entitled to vote on the matter shall vote on the matter together as a single class (in lieu of all other series of preferred stock).
(d) No Vote if Redemption. No vote or consent of the Holders shall be required pursuant to Section 7(b) or (c) if, at or prior to the time when the act with respect to such vote or consent would otherwise be required shall be effected, the Company shall have redeemed or shall have called for redemption all outstanding shares of Series F Preferred Stock, with proper notice and sufficient funds having been set aside for such redemption, in each case pursuant to Section 6 above.
Section 8. Preemption and Conversion Rights.
The Holders shall not have any rights of preemption or conversion.
Section 9. Rank.
Notwithstanding anything set forth in the Certificate of Incorporation or this Certificate of Designation to the contrary, the Board of Directors, the Preferred Stock Committee or any other duly authorized committee thereof, without the vote of the Holders, may authorize and issue additional shares of Junior Stock or Parity Stock.
Section 10. Repurchase.
Subject to the limitations imposed herein, the Company may purchase and sell Series F Preferred Stock from time to time to such extent, in such manner, and upon such terms as the Board of Directors, the Preferred Stock Committee or any other duly authorized committee thereof may determine; provided, however, that the Company shall not use any of its funds for any such purchase when there are reasonable grounds to believe that the Company is, or by such purchase would be, rendered insolvent; provided, further, however, that in the event that the Company beneficially owns any Series F Preferred Stock, the Company will procure that voting rights in respect of such Series F Preferred Stock are not exercised.
Section 11. Unissued or Reacquired Shares.
Shares of Series F Preferred Stock not issued or which have been issued and redeemed or otherwise purchased or acquired by the Company shall be restored to the status of authorized but unissued shares of preferred stock without designation as to series.
Section 12. No Sinking Fund.
Shares of Series F Preferred Stock are not subject to the operation of a sinking fund.
Section 13. Transfer Agent, Registrar and Paying Agent.
The duly appointed Transfer Agent, Registrar and paying agent for the Series F Preferred Stock shall be The Bank of New York Mellon. The Company may, in its sole discretion, remove the Transfer Agent in accordance with the agreement between the Company and the Transfer Agent; provided that the Company shall appoint a successor transfer agent who shall accept such appointment prior to the effectiveness of such removal. Upon any such removal or appointment, the Company shall send notice thereof by first-class mail, postage prepaid, to the Holders.
Section 14. Replacement Certificates.
Mutilated, Destroyed, Stolen and Lost Certificates. If physical certificates are issued, the Company shall replace any mutilated certificate at the Holder’s expense upon surrender of that certificate to the Transfer Agent. The Company shall replace certificates that become destroyed, stolen or lost at the Holder’s expense upon delivery to the Company and the Transfer Agent of satisfactory evidence that the certificate has been destroyed, stolen or lost, together with any indemnity that may be required by the Transfer Agent and the Company.
Section 15. Form.
(a) Global Series F Preferred Stock. Series F Preferred Stock may be issued in the form of one or more permanent global shares of Series F Preferred Stock in definitive, fully registered form with a global legend in substantially the form attached hereto as Exhibit A (each, a “Global Series F Preferred Stock”), which is hereby incorporated in and expressly made a part of this Certificate of Designation. The Global Series F Preferred Stock may have notations, legends or endorsements required by law, stock exchange rules, agreements to which the Company is subject, if any, or usage (provided that any such notation, legend or endorsement is in a form acceptable to the Company). The aggregate number of shares represented by each Global Series F Preferred Stock may from time to time be increased or decreased by adjustments made on the records of the Registrar and the Depositary or its nominee as hereinafter provided. This Section 15(a) shall apply only to a Global Series F Preferred Stock deposited with or on behalf of the Depositary.
(b) Delivery to Depositary. If Global Series F Preferred Stock is issued, the Company shall execute and the Registrar shall, in accordance with this Section, countersign and deliver initially one or more Global Series F Preferred Stock that (i) shall be registered in the name of Cede & Co. or other nominee of the Depositary and (ii) shall be delivered by the
Registrar to the Depositary or pursuant to instructions received from the Depositary or held by the Registrar as custodian for the Depositary pursuant to an agreement between the Depositary and the Registrar.
(c) Agent Members. If Global Series F Preferred Stock is issued, members of, or participants in, the Depositary (“Agent Members”) shall have no rights under this Certificate of Designation with respect to any Global Series F Preferred Stock held on their behalf by the Depositary or by the Registrar as the custodian of the Depositary or under such Global Series F Preferred Stock and the Depositary may be treated by the Company, the Registrar and any agent of the Company or the Registrar as the absolute owner of such Global Series F Preferred Stock for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Registrar or any agent of the Company or the Registrar from giving effect to any written certification, proxy or other authorization furnished by the Depositary or impair, as between the Depositary and its Agent Members the operation of customary practices of the Depositary governing the exercise of the rights of a holder of a beneficial interest in any Global Series F Preferred Stock. If Global Series F Preferred Stock is issued, the Depositary may grant proxies or otherwise authorize any Person to take any action that a Holder is entitled to take pursuant to the Series F Preferred Stock, this Certificate of Designation or the Certificate of Incorporation.
(d) Physical Certificates. Owners of beneficial interests in any Global Series F Preferred Stock shall not be entitled to receive physical delivery of certificated shares of Series F Preferred Stock, unless (x) the Depositary has notified the Company that it is unwilling or unable to continue as Depositary for the Global Series F Preferred Stock and the Company does not appoint a qualified replacement for the Depositary within 90 days, (y) the Depositary ceases to be a “clearing agency” registered under the Exchange Act and the Company does not appoint a qualified replacement for the Depositary within 90 days or (z) the Company decides to discontinue the use of book-entry transfer through the Depositary. In any such case, the Global Series F Preferred Stock shall be exchanged in whole for definitive shares of Series F Preferred Stock in registered form, with the same terms and of an equal aggregate Liquidation Preference. Such definitive shares of Series F Preferred Stock shall be registered in the name or names of the Person or Persons specified by the Depositary in a written instrument to the Registrar.
(e) Signature. An Officer shall sign any Global Series F Preferred Stock for the Company in accordance with the Company’s by-laws and applicable law, by manual or facsimile signature. If an Officer whose signature is on a Global Series F Preferred Stock no longer holds that office at the time the Transfer Agent countersigned the Global Series F Preferred Stock, the Global Series F Preferred Stock shall be valid nevertheless. A Global Series F Preferred Stock shall not be valid until an authorized signatory of the Transfer Agent manually countersigns Global Series F Preferred Stock. Each Global Series F Preferred Stock shall be dated the date of its countersignature.
Section 16. Taxes.
(a) Transfer Taxes. The Company shall pay any and all stock transfer, documentary, stamp and similar taxes that may be payable in respect of any issuance or delivery of shares of Series F Preferred Stock or shares of Common Stock or other securities issued on account of Series F Preferred Stock pursuant hereto or certificates representing such shares or securities. The Company shall not, however, be required to pay any such tax that may be payable in respect of any transfer involved in the issuance or delivery of shares of Series F Preferred Stock, shares of Common Stock or other securities in a name other than that in which the shares of Series F Preferred Stock with respect to which such shares or other securities are issued or delivered were registered, or in respect of any payment to any Person other than a payment to the registered holder thereof, and shall not be required to make any such issuance, delivery or payment unless and until the Person otherwise entitled to such issuance, delivery or payment has paid to the Company the amount of any such tax or has established, to the satisfaction of the Company, that such tax has been paid or is not payable.
(b) Withholding. All payments and distributions (or deemed distributions) on the shares of Series F Preferred Stock shall be subject to withholding and backup withholding of tax to the extent required by law, subject to applicable exemptions, and amounts withheld, if any, shall be treated as received by Holders.
Section 17. Notices.
All notices referred to herein shall be in writing, and, unless otherwise specified herein, all notices hereunder shall be deemed to have been given upon the earlier of receipt thereof or three Business Days after the mailing thereof if sent by registered or certified mail (unless first class mail shall be specifically permitted for such notice under the terms of this Certificate of Designation) with postage prepaid, addressed: (i) if to the Company, to its office at 399 Park Avenue, New York, New York 10043 (Attention: Corporate Secretary) or to the Transfer Agent at its office at 480 Washington Boulevard, 29th Floor, Jersey City, New Jersey 07310 (Attention: Corporate Trust Office), or other agent of the Company designated as permitted by this Certificate of Designation, or (ii) if to any Holder, to such Holder at the address of such Holder as listed in the stock record books of the Company (which may include the
records of the Transfer Agent) or (iii) to such other address as the Company or any such Holder, as the case may be, shall have designated by notice similarly given.
Exhibit A
FORM OF
8.50% NON-CUMULATIVE PREFERRED STOCK, SERIES F
FACE OF SECURITY
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO. HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR’S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE CERTIFICATE OF DESIGNATION REFERRED TO BELOW.
REGISTRAR’S COUNTERSIGNATURE
These are shares of Series F Preferred Stock referred to in the within-mentioned Certificate of Designation.
Dated:
| THE BANK OF NEW YORK MELLON, as Registrar |
|---|
| By: |
| Name: |
| Title: |
REVERSE OF CERTIFICATE
Dividends on each share of Series F Preferred Stock shall be payable at the rate provided in the Certificate of Designation.
The shares of Series F Preferred Stock shall be redeemable at the option of the Company in the manner and in accordance with the terms set forth in the Certificate of Designation.
The Company shall furnish without charge to each holder who so requests the powers, designation, preferences and relative, participating, optional or other special rights of each class or series of share capital issued by the Company and the qualifications. limitations or restrictions of such preferences and/or rights.
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers the shares of Series F Preferred Stock evidenced hereby to:
(Insert assignees social security or taxpayer identification number, if any)
(Insert address and zip code of assignee)
and irrevocably appoints:
as agent to transfer the shares of Series F Preferred Stock evidenced hereby on the books of the Transfer Agent. The agent may substitute another to act for him or her.
| Date: |
|---|
| Signature: |
| (Sign exactly as your name appears on the other side of this Certificate) |
| Signature Guarantee: |
(Signature must be guaranteed by an “eligible guarantor institution” that is a bank, stockbroker, savings and loan association or credit union meeting the requirements of the Transfer Agent, which requirements include membership or participation in the Securities Transfer Agents Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Transfer Agent in addition to, or in substitution for STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.)
Exhibit IV
Series R Participating Cumulative Preferred Stock
Section 1. Designation and Number of Shares.
The shares of such series shall be designated as “Series R Participating Cumulative Preferred Stock” (the “Series R Preferred Stock”), and the number of shares constituting such series shall be 28,000. Such number of shares of the Series R Preferred Stock may be increased or decreased by resolution of the Board of Directors; provided that no decrease shall reduce the number of shares of Series R Preferred Stock to a number less than the number of shares then outstanding plus the number of shares issuable upon exercise or conversion of outstanding rights, options or other securities issued by the Corporation.
Section 2. Dividends and Distributions.
(a) Subject to the prior and superior rights of the holders of any shares of any class or series of stock of the Corporation ranking prior and superior to the shares of Series R Preferred Stock with respect to dividends, the holders of shares of Series R Preferred Stock, in preference to the holders of shares of any class or series of stock of the Corporation ranking junior to the Series R Preferred Stock in respect thereof, shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, regular quarterly dividends payable on such dates each year as designated by the Board of Directors (each such date being referred to herein as a “Quarterly Dividend Payment Date”), commencing on the first Quarterly Dividend Payment Date after the first issuance of any share or fraction of a share of Series R Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (i) $1.00 and (ii) the Multiplier Number times the aggregate per share amount of all cash dividends or other distributions and the Multiplier Number times the aggregate per share amount of all non-cash dividends or other distributions (other than (A) a dividend payable in shares of Common Stock, par value $0.01 per share, of the Corporation (the “Common Stock”) or (B) a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise)), declared on the Common Stock since the immediately preceding Quarterly Dividend Payment Date, or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series R Preferred Stock. As used herein, the “Multiplier Number” shall be 1,000,000; provided that if, at any time after June 9, 2009, there shall be any change in the Common Stock, whether by reason of stock dividends, stock splits, reverse stock splits, recapitalization, mergers, consolidations, combinations or exchanges of securities, split-ups, split-offs, spin-offs, liquidations or other similar changes in capitalization, or any distribution or issuance of shares of its capital stock in a merger, share exchange, reclassification, or change of the outstanding shares of Common Stock, then in each such event the Board of Directors shall adjust the Multiplier Number to the extent appropriate such that following such adjustment each share of Series R Preferred Stock shall be in the same economic position as prior to such event.
(b) The Corporation shall declare a dividend or distribution on the Series R Preferred Stock as provided in Section 2(a) immediately after it declares a dividend or distribution on the Common Stock (other than as described in Sections 2(a)(ii)(A) and 2(a)(ii)(B)); provided that if no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date (or, with respect to the first Quarterly Dividend Payment Date, the period between the first issuance of any share or fraction of a share of Series R Preferred Stock and such first Quarterly Dividend Payment Date), a dividend of $1.00 per share on the Series R Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date.
(c) Dividends shall begin to accrue and be cumulative on outstanding shares of Series R Preferred Stock from the Quarterly Dividend Payment Date immediately preceding the date of issuance of such shares of Series R Preferred Stock, unless the date of issuance of such shares is on or before the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue and be cumulative from the date of issue of such shares, or unless the date of issue is a date after the record date for the determination of holders of shares of Series R Preferred Stock entitled to receive a quarterly dividend and on or before such Quarterly Dividend Payment Date, in which case dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on shares of Series R Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series R Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall not be more than 60 days prior to the date fixed for the payment thereof.
Section 3. Voting Rights. In addition to any other voting rights required by law, the holders of shares of Series R Preferred Stock shall have the following voting rights:
(a) Each share of Series R Preferred Stock shall entitle the holder thereof to a number of votes equal to the Multiplier Number on all matters submitted to a vote of stockholders of the Corporation.
(b) Except as otherwise provided herein or by law, the holders of shares of Series R Preferred Stock and the holders of shares of Common Stock shall vote together as a single class on all matters submitted to a vote of stockholders of the Corporation.
(c) (i) If at any time dividends on any Series R Preferred Stock shall be in arrears in an amount equal to six quarterly dividends thereon, the occurrence of such contingency shall mark the beginning of a period (herein called a “default period”) which shall extend until such time when all accrued and unpaid dividends for all previous quarterly dividend periods and for the current quarterly dividend period on all shares of Series R Preferred Stock then outstanding shall have been declared and paid or set apart for payment. During each default period, all holders of Series R Preferred Stock and any other series of Preferred Stock then entitled as a class to elect directors, voting together as a single class, irrespective of series, shall have the right to elect two Directors.
(ii) During any default period, such voting right of the holders of Series R Preferred Stock may be exercised initially at a special meeting called pursuant to Section 3(c)(iii) hereof or at any annual meeting of stockholders, and thereafter at annual meetings of stockholders; provided that neither such voting right nor the right of the holders of any other series of Preferred Stock, if any, to increase, in certain cases, the authorized number of Directors shall be exercised unless the holders of 10% in number of shares of Preferred Stock outstanding shall be present in person or by proxy. The absence of a quorum of holders of Common Stock shall not affect the exercise by holders of Preferred Stock of such voting right. At any meeting at which holders of Preferred Stock shall initially exercise such voting right, they shall have the right, voting as a class, to elect Directors to fill such vacancies, if any, in the Board of Directors as may then exist up to two Directors or, if such right is exercised at an annual meeting, to elect two Directors. If the number which may be so elected at any special meeting does not amount to the required number, the holders of the Preferred Stock shall have the right to make such increase in the number of Directors as shall be necessary to permit the election by them of the required number. After the holders of the Preferred Stock shall have exercised their right to elect Directors in any default period and during the continuance of such period, the number of Directors shall not be increased or decreased except by vote of the holders of Preferred Stock as herein provided or pursuant to the rights of any equity securities ranking senior to or pari passu with the Series R Preferred Stock.
(iii) Unless the holders of Preferred Stock shall have previously exercised their right to elect Directors during an existing default period, the Board of Directors may order, or any stockholder or stockholders owning in the aggregate not less than 10% of the total number of shares of Preferred Stock outstanding, irrespective of series, may request, the calling of a special meeting of holders of Preferred Stock, which meeting shall thereupon be called by the Chief Executive Officer, a Vice President or the Secretary of the Corporation. Notice of such meeting and of any annual meeting at which holders of Preferred Stock are entitled to vote pursuant to this Section 3(c)(iii) shall be given to each holder of record of Preferred Stock by mailing such notice to him at the address of such holder shown on the registry books of the Corporation. Such meeting shall be called for a time not earlier than 20 days and not later than 60 days after such order or request or in default of the calling of such meeting within 60 days after such order or request, such meeting may be called on similar notice by any stockholder or stockholders owning in the aggregate not less than 10% of the total number of shares of Preferred Stock outstanding, irrespective of series. Notwithstanding the provisions of this Section 3(c)(iii), no such special meeting shall be called during the period within 60 days immediately preceding the date fixed for the next annual meeting of stockholders.
(iv) In any default period, the holders of Common Stock, and other classes of stock of the Corporation if applicable, shall continue to be entitled to elect the whole number of Directors until the holders of Preferred Stock shall have exercised their right to elect two Directors voting as a class, after the exercise of which right (x) the Directors so elected by the holders of Preferred Stock shall continue in office until their successors shall have been elected by such holders or until the expiration of the default period, and (y) any vacancy in the Board of Directors may (except as provided in Section 3(c)(ii) hereof) be filled by vote of a majority of the remaining Directors theretofore elected by the holders of the class of stock which elected the Director whose office shall have become vacant. References in this Section 3(c) to Directors elected by the holders of a particular class of stock shall include Directors elected by such Directors to fill vacancies as provided in clause (y) of the foregoing sentence.
(v) Immediately upon the expiration of a default period, (x) the right of the holders of Preferred Stock as a class to elect Directors shall cease, (y) the term of any Directors elected by the holders of Preferred Stock as a class
shall terminate, and (z) the number of Directors shall be such number as may be provided for in the certificate of incorporation or bylaws irrespective of any increase made pursuant to the provisions of Section 3(c)(ii) (such number being subject, however, to change thereafter in any manner provided by law or in the certificate of incorporation or bylaws). Any vacancies in the Board of Directors effected by the provisions of clauses (y) and (z) in the preceding sentence may be filled by a majority of the remaining Directors.
(d) The certificate of incorporation of the Corporation shall not be amended in any manner (whether by merger or otherwise) so as to adversely affect the powers, preferences or special rights of the Series R Preferred Stock without the affirmative vote of the holders of a majority of the outstanding shares of Series R Preferred Stock, voting separately as a class.
(e) Except as otherwise expressly provided herein, holders of Series R Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action.
Section 4. Certain Restrictions.
(a) Whenever quarterly dividends or other dividends or distributions payable on the Series R Preferred Stock as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on outstanding shares of Series R Preferred Stock shall have been paid in full, the Corporation shall not:
(i) declare or pay dividends on, or make any other distributions on, any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding-up) to the Series R Preferred Stock;
(ii) declare or pay dividends on, or make any other distributions on, any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding-up) with the Series R Preferred Stock, except dividends paid ratably on the Series R Preferred Stock and all such other parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled;
(iii) redeem, purchase or otherwise acquire for value any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding-up) to the Series R Preferred Stock; provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such junior stock in exchange for shares of stock of the Corporation ranking junior (as to dividends and upon dissolution, liquidation or winding-up) to the Series R Preferred Stock; or
(iv) redeem, purchase or otherwise acquire for value any shares of Series R Preferred Stock, or any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding-up) with the Series R Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of Series R Preferred Stock and all such other parity stock upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes.
(b) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for value any shares of stock of the Corporation unless the Corporation could, under paragraph 4(a), purchase or otherwise acquire such shares at such time and in such manner.
Section 5. Reacquired Shares.
Any shares of Series R Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired promptly after the acquisition thereof. All such shares shall upon their retirement become authorized but unissued shares of Preferred Stock without designation as to series and may be reissued as part of a new series of Preferred Stock to be created by the Board of Directors as permitted by the certificate of incorporation of the Corporation or as otherwise permitted under Delaware law.
Section 6. Liquidation, Dissolution and Winding-up.
Upon any liquidation, dissolution or winding-up of the Corporation, no distribution shall be made (a) to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding-up) to the Series R Preferred Stock unless, prior thereto, the holders of shares of Series R Preferred Stock shall have received $1.00 per share, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment; provided that the holders of shares of Series R Preferred Stock shall be entitled to receive an aggregate amount per share equal to (x) the Multiplier Number times
(y) the aggregate amount to be distributed per share to holders of Common Stock, or (b) to the holders of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding-up) with the Series R Preferred Stock, except distributions made ratably on the Series R Preferred Stock and all such other parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up.
Section 7. Consolidation, Merger, etc.
If the Corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash or any other property, then in any such case the shares of Series R Preferred Stock shall at the same time be similarly exchanged for or changed into an amount per share equal to (x) the Multiplier Number times (y) the aggregate amount of stock, securities, cash or any other property. as the case may be, into which or for which each share of Common Stock is changed or exchanged.
Section 8. No Redemption.
The Series R Preferred Stock shall not be redeemable.
Section 9. Rank.
The Series R Preferred Stock shall rank junior to all other series of the Preferred Stock as to the payment of dividends and the distribution of assets upon liquidation, dissolution and winding-up, unless the terms of such series shall specifically provide otherwise, and shall rank senior to the Common Stock as to such matters.
Section 10. Fractional Shares.
Series R Preferred Stock may be issued in fractions of a share which shall entitle the holder, in proportion to such holder’s fractional shares, to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of holders of Series R Preferred Stock.
Exhibit V
6.5% Non-Cumulative Convertible Preferred Stock, Series T
Section 1. Designation.
The designation of the series of preferred stock shall be “6.5% Non-Cumulative Convertible Preferred Stock, Series T” (the “Convertible Preferred Stock”). Each share of Convertible Preferred Stock shall be identical in all respects to every other share of Convertible Preferred Stock. Convertible Preferred Stock will rank equally with Parity Stock, if any, will rank senior to Junior Stock and will rank junior to Senior Stock, if any, with respect to the payment of dividends and/or the distribution of assets in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company.
Section 2. Number of Shares.
The number of authorized shares of Convertible Preferred Stock shall be 66,700. That number from time to time may be increased (but not in excess of the total number of authorized shares of preferred stock) or decreased (but not below the number of shares of Convertible Preferred Stock then outstanding) by further resolution duly adopted by the Board of Directors, the Preferred Stock Committee or any other duly authorized committee thereof and by the filing of a certificate pursuant to the provisions of the General Corporation Law of the State of Delaware stating that such increase or reduction, as the case may be, has been so authorized. The Company shall have the authority to issue fractional shares of Convertible Preferred Stock.
Section 3. Definitions. As used herein with respect to Convertible Preferred Stock:
“Affiliate” of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, “control” when used with respect to any specified Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.
“Agent Members” has the meaning set forth in Section 23(c).
“Base Price” has the meaning set forth in Section 10(a).
“Board of Directors” has the meaning set forth in the recitals in the Certificate of Designation of 6.5% Non-Cumulative Convertible Preferred Stock, Series T of Citigroup Inc. filed on January 22, 2008.
“Business Day” means any weekday that is not a legal holiday in New York, New York and is not a day on which banking institutions in New York, New York are authorized or required by law or regulation to be closed.
“Closing Price” of the Common Stock on any date of determination means the closing sale price or, if no closing sale price is reported, the last reported sale price of the shares of the Common Stock on the New York Stock Exchange on such date. If the Common Stock is not traded on the New York Stock Exchange on any date of determination, the Closing Price of the Common Stock on such date of determination means the closing sale price as reported in the composite transactions for the principal U.S. national or regional securities exchange on which the Common Stock is so listed or quoted, or, if no closing sale price is reported, the last reported sale price on the principal U.S. national or regional securities exchange on which the Common Stock is so listed or quoted, or if the Common Stock is not so listed or quoted on a U.S. national or regional securities exchange, the last quoted bid price for the Common Stock in the over-the-counter market as reported by Pink Sheets LLC or similar organization, or, if that bid price is not available, the market price of the Common Stock on that date as determined by a nationally recognized investment banking firm (unaffiliated with the Company) retained by the Company for this purpose.
“Common Stock” means the common stock of the Company, par value $0.01 per share, or any other shares of the capital stock of the Company into which such shares of common stock shall be reclassified or changed.
“Constituent Person” has the meaning set forth in Section 13(a).
“Conversion Agent” means the Transfer Agent acting in its capacity as conversion agent for the Convertible Preferred Stock, and its successors and assigns.
“Conversion at the Option of the Company Date” has the meaning set forth in Section 11(c).
“Conversion Date” has the meaning set forth in Section 8(e).
“Conversion Price” at any time means, for each share of Convertible Preferred Stock, a dollar amount equal to $50,000 divided by the Conversion Rate (initially approximately $33.73).
“Conversion Rate” means for each share of Convertible Preferred Stock, 1,482.3503 shares of Common Stock, subject to adjustment as set forth herein.
“Convertible Preferred Stock” shall have the meaning set forth in Section 1.
“Current Market Price” per share of Common Stock on any day means the average of the VWAP per share of Common Stock on each of the 10 consecutive Trading Days ending on the earlier of the day in question and the day before the Ex-date or other specified date with respect to the issuance or distribution requiring such computation, appropriately adjusted to take into account the occurrence during such period of any event described in Section 12.
“Depositary” means DTC or its nominee or any successor depositary appointed by the Company.
“Dividend Payment Date” shall have the meaning set forth in Section 4(a).
“Dividend Period” shall have the meaning set forth in Section 4(a).
“Dividend Record Date” shall have the meaning set forth in Section 4(a).
“Dividend Threshold Amount” shall have the meaning set forth in Section 12(a)(iv).
“DTC” means The Depository Trust Company.
“Ex-date” when used with respect to any issuance or distribution, means the first date on which the shares of Common Stock or other securities trade without the right to receive an issuance or distribution.
“Exchange Property” has the meaning set forth in Section 13(a).
“Expiration Time” has the meaning set forth in Section 12(a)(v).
“Fundamental Change” has the meaning set forth in Section 10(a).
“Global Preferred Stock” has the meaning set forth in Section 23(a).
“Holder” means the Person in whose name the shares of the Convertible Preferred Stock are registered, which may be treated by the Company, Transfer Agent, Registrar, paying agent and Conversion Agent as the absolute owner of the shares of Convertible Preferred Stock for the purpose of making payment and settling the related conversions and for all other purposes.
“Junior Stock” means the Common Stock and any other class or series of stock of the Company now existing or hereafter authorized over which Convertible Preferred Stock has preference or priority in the payment of dividends or in the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the Company.
“Make-Whole Acquisition” means the occurrence, prior to any Conversion Date, of one of the following:
(i) a “person” or “group” within the meaning of Section 13(d) of the Exchange Act files a Schedule TO or any schedule, form or report under the Exchange Act disclosing that such person or group has become the direct or indirect ultimate “beneficial owner,” as defined in Rule 13d-3 under the Exchange Act, of common equity of the Company representing more than 50% of the voting power of the outstanding Common Stock; or
(ii) consummation of any consolidation or merger of the Company or similar transaction or any sale, lease or other transfer in one transaction or a series of transactions of all or substantially all of the property and assets of the Company to any Person other than one of the Company’s subsidiaries, in each case pursuant to which the Common Stock will be converted into cash, securities or other property, other than pursuant to a transaction in which the Persons that “beneficially owned” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, voting shares of the Company immediately prior to such transaction beneficially own, directly or
indirectly, voting shares representing a majority of the total voting power of all outstanding classes of voting shares of the continuing or surviving Person immediately after the transaction;
provided, however, that a Make-Whole Acquisition will not be deemed to have occurred if at least 90% of the consideration received by holders of the Common Stock in the transaction or transactions consists of shares of common stock or depositary receipts in respect of common stock that are traded on a U.S. national securities exchange or securities exchange in the European Economic Area or that will be so traded when issued or exchanged in connection with a Make-Whole Acquisition.
“Make-Whole Acquisition Conversion” has the meaning set forth in Section 9(a).
“Make-Whole Acquisition Conversion Period” has the meaning set forth in Section 9(a).
“Make-Whole Acquisition Effective Date” has the meaning set forth in Section 9(a).
“Make-Whole Acquisition Stock Price” means the consideration paid per share of Common Stock in a Make-Whole Acquisition. If such consideration consists only of cash, the Make-Whole Acquisition Stock Price shall equal the amount of cash paid per share of Common Stock. If such consideration consists of any property other than cash, the Make-Whole Acquisition Stock Price shall be the average of the Closing Price per share of Common Stock on each of the 10 consecutive Trading Days up to, but including, the Make-Whole Acquisition Effective Date.
“Make-Whole Shares” has the meaning set forth in Section 9(b).
“Market Disruption Event” means any of the following events that has occurred:
(i) any suspension of, or limitation imposed on, trading by any exchange or quotation system on which the Closing Price is determined pursuant to the definition of the Trading Day (a “Relevant Exchange”) during the one-hour period prior to the close of trading for the regular trading session on the Relevant Exchange (or for purposes of determining the VWAP per share of Common Stock any period or periods aggregating one half-hour or longer during the regular trading session on the relevant day) and whether by reason of movements in price exceeding limits permitted by the Relevant Exchange, or otherwise relating to Common Stock or in futures or options contracts relating to the Common Stock on the Relevant Exchange;
(ii) any event (other than an event described in clause (iii)) that disrupts or impairs (as determined by the Company in its reasonable discretion) the ability of market participants during the one-hour period prior to the close of trading for the regular trading session on the Relevant Exchange (or for purposes of determining the VWAP per share of Common Stock any period or periods aggregating one half-hour or longer during the regular trading session on the relevant day) in general to effect transactions in, or obtain market values for, the Common Stock on the Relevant Exchange or to effect transactions in, or obtain market values for, futures or options contracts relating to the Common Stock on the Relevant Exchange; or
(iii) the failure to open of the Relevant Exchange on which futures or options contracts relating to the Common Stock, are traded or the closure of such exchange prior to its respective scheduled closing time for the regular trading session on such day (without regard to after hours or any other trading outside of the regular trading session hours) unless such earlier closing time is announced by such exchange at least one hour prior to the earlier of the actual closing time for the regular trading session on such day, and the submission deadline for orders to be entered into such exchange for execution at the actual closing time on such day.
“Nonpayment” shall have the meaning set forth in Section 14(b)(i).
“Notice of Conversion at the Option of the Company” has the meaning set forth in Section 11(c).
“Officer” means the Chief Executive Officer, the Chairman, the Chief Administrative Officer, any Vice Chairman, the Chief Financial Officer, the Controller, the Chief Accounting Officer, the Treasurer and Head of Corporate Finance, any Assistant Treasurer, the General Counsel and Corporate Secretary and any Assistant Secretary of the Company.
“Officers’ Certificate” means a certificate signed (i) by the Chief Executive Officer, the Chairman, the Chief Administrative Officer, any Vice Chairman, the Chief Financial Officer, the Controller or the Chief Accounting Officer, and (ii) by the Treasurer and Head of Corporate Finance, any Assistant Treasurer, the General Counsel and Corporate Secretary or any Assistant Secretary of the Company, and delivered to the Conversion Agent.
“Parity Stock” means any class or series of stock of the Company hereafter authorized that ranks equally with the Convertible Preferred Stock in the payment of dividends and in the distribution of assets on any liquidation, dissolution or winding up of the Company.
“Person” means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint-stock company, limited liability company or trust.
“Purchased Shares” has the meaning set forth in Section 12(a)(v).
“Record Date” has the meaning set forth in Section 12(d).
“Reference Price” means the price paid per share of Common Stock in a Fundamental Change. If the holders of shares of Common Stock receive only cash in the Fundamental Change, the Reference Price shall be the cash amount paid per share. Otherwise the Reference Price shall be the average of the Closing Price per share of Common Stock on each of the 10 Trading Days up to, but not including, the effective date of the Fundamental Change.
“Registrar” means the Transfer Agent acting in its capacity as registrar for the Convertible Preferred Stock, and its successors and assigns.
“Relevant Exchange” has the meaning set forth above in the definition of Market Disruption Event.
“Reorganization Event” has the meaning set forth in Section 13(a).
“Senior Stock” means any class or series of stock of the Company ‘now existing or hereafter authorized which has preference or priority over the Convertible Preferred Stock as to the payment of dividends or in the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the Company.
“Trading Day” means, for purposes of determining a VWAP or Closing Price per share of Common Stock or a Closing Price, a Business Day on which the Relevant Exchange (as defined in the definition of Market Disruption Event) is scheduled to be open for business and on which there has not occurred or does not exist a Market Disruption Event.
“Transfer Agent” means The Bank of New York Mellon acting as Transfer Agent, Registrar, paying agent and Conversion Agent for the Convertible Preferred Stock, and its successors and assigns.
“Trust” shall have the meaning set forth in Section 6(d).
“VWAP” per share of the Common Stock on any Trading Day means the per share volume-weighted average price as displayed under the heading Bloomberg VWAP on Bloomberg page C UN <equity> AQR (or its equivalent successor if such page is not available) in respect of the period from the open of trading on the relevant Trading Day until the close of trading on the relevant Trading Day (or if such volume-weighted average price is unavailable, the market price of one share of Common Stock on such Trading Days determined, using a volume-weighted average method, by a nationally recognized investment banking firm (unaffiliated with the Company) retained for this purpose by the Company).
Section 4. Dividends.
(a) Rate. Holders shall be entitled to receive, if, as and when declared by the Board of Directors, the Preferred Stock Committee or any other duly authorized committee thereof, but only out of assets legally available therefor, non-cumulative cash dividends on the liquidation preference of $50,000 per share of Convertible Preferred Stock, and no more, payable quarterly in arrears on each February 15, May 15, August 15 and November 15; provided, however, if any such day is not a Business Day, then payment of any dividend otherwise payable on that date will be made on the next succeeding day that is a Business Day, unless that day falls in the next calendar year, in which case payment of such dividend will occur on the immediately preceding Business Day (in either case, without any interest or other payment in respect of such delay) (each such day on which dividends are payable a “Dividend Payment Date”). The period from and including the date of issuance of the Convertible Preferred Stock or any Dividend Payment Date to, but excluding, the next Dividend Payment Date is a “Dividend Period.” Dividends on each share of Convertible Preferred Stock will accrue on the liquidation preference of $50,000 per share at a rate per annum equal to 6.5%. The record date for payment of dividends on the Convertible Preferred Stock will be the fifteenth day of the calendar month immediately preceding the month during which the Dividend Payment Date falls or such other record date fixed by the Board of Directors, the Preferred Stock Committee or any other duly authorized committee thereof that is not more than 30 nor less than 10 days prior to such Dividend Payment Date (each, a “Dividend Record Date”). Any such day that is a Dividend Record Date
will be a Dividend Record Date whether or not such day is a Business Day. The amount of dividends payable will be computed on the basis of a 360-day year of twelve 30-day months.
(b) Non-Cumulative Dividends. If the Board of Directors, the Preferred Stock Committee or any other duly authorized committee thereof does not declare a dividend on the Convertible Preferred Stock for any Dividend Period prior to the related Dividend Payment Date, that dividend will not accrue, and the Company will have no obligation to pay, and Holders shall have no right to receive, a dividend for that Dividend Period on the related Dividend Payment Date or at any future time whether or not dividends on the Convertible Preferred Stock or any other series of preferred stock or common stock are declared for any subsequent Dividend Period with respect to Convertible Preferred Stock, Parity Stock, Junior Stock or any other class or series of authorized preferred stock of the Company. References herein to the “accrual” of dividends refer only to the determination of the amount of such dividend and do not imply that any right to a dividend arises prior to the date on which a dividend is declared.
(c) Priority of Dividends. So long as any share of Convertible Preferred Stock remains outstanding, unless as to a Dividend Payment Date full dividends on all outstanding shares of the Convertible Preferred Stock have been declared and paid or declared and a sum sufficient for the payment of those dividends has been set aside for the Dividend Period then ending, the Company will not, and will cause its subsidiaries not to, during the next succeeding Dividend Period that commences on such Dividend Payment Date, declare or pay any dividend on, make any distributions relating to, or redeem, purchase, acquire or make a liquidation payment relating to, any of Junior Stock, or make any guarantee payment with respect thereto, other than:
(i) purchases, redemptions or other acquisitions of shares of Junior Stock in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of employees, officers, directors or consultants;
(ii) purchases of shares of Common Stock pursuant to a contractually binding requirement to buy stock existing prior to the commencement of the then-current dividend period, including under a contractually binding stock repurchase plan;
(iii) as a result of an exchange or conversion of any class or series of Junior Stock for any other class or series of Junior Stock;
(iv) the purchase of fractional interests in shares of Junior Stock pursuant to the conversion or exchange provisions of such Junior Stock or the security being converted or exchanged;
(v) the purchase of Junior Stock by an investment banking subsidiary of the Company in connection with the distribution thereof; or
(vi) the purchase of Junior Stock by any investment banking subsidiary of the Company in connection with market-making or other secondary market activities in the ordinary course of the business of such subsidiary.
The foregoing restriction, however, will not apply to any Junior Stock dividends paid by the Company where the dividend stock is the same stock as that on which the dividend is being paid. Except as provided below, for so long as any share of Convertible Preferred Stock remains outstanding, if dividends are not declared and paid in full upon the shares of Convertible Preferred Stock and any Parity Stock, all dividends declared upon shares of Convertible Preferred Stock and any Parity Stock will be declared on a proportional basis so that the amount of dividends declared per share will bear to each other the same ratio that accrued dividends for the then-current Dividend Period per share of Convertible Preferred Stock and accrued dividends for the then-current Dividend Period per share of any Parity Stock (including, in the case of any such Parity Stock that bears cumulative dividends, all accrued and unpaid dividends) bear to each other.
Subject to the foregoing, and not otherwise, such dividends payable in cash, stock or otherwise, as may be determined by the Board of Directors, the Preferred Stock Committee or any other duly authorized committee thereof, may be declared and paid on any Junior Stock and Parity Stock from time to time out of any assets legally available for such payment, and Holders will not be entitled to participate in those dividends.
(e) Conversion Following A Record Date. If a Conversion Date for any shares of Convertible Preferred Stock is prior to the close of business on a Dividend Record Date for any declared dividend for the then-current Dividend Period, the Holder of such shares will not be entitled to any such dividend. If the Conversion Date for any shares of Convertible Preferred Stock is after the close of business on a Dividend Record Date for any declared dividend for the then-current Dividend Period, but prior to the corresponding Dividend Payment Date, the Holder of such shares shall be entitled to
receive such dividend, notwithstanding the conversion of such shares prior to the Dividend Payment Date. However, such shares, upon surrender for conversion, must be accompanied by funds equal to the dividend on such shares; provided that no such payment need be made (i) if the Company has issued a notice of redemption of the Convertible Preferred Stock, (ii) if the Company has issued a notice of conversion at its option of the Convertible Preferred Stock, or (iii) if a conversion is made in connection with a Make-Whole Acquisition or Fundamental Change, in each case in accordance with the terms hereof.
Section 5. Liquidation Rights.
(a) Liquidation. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company, Holders shall be entitled, out of assets legally available therefor, before any distribution or payment out of the assets of the Company may be made to or set aside for the holders of any Junior Stock and subject to the rights of the holders of any class or series of securities ranking senior to or on parity with Convertible Preferred Stock upon liquidation and the rights of the Company’s depositors and other creditors, to receive in full a liquidating distribution in the amount of the liquidation preference of $50,000 per share, plus any accrued dividends thereon from the last dividend payment date to, but excluding, the date of the liquidation, dissolution or winding up if and to the extent declared. Holders shall not be entitled to any further payments in the event of any such voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company other than what is expressly provided for in this Section 5.
(b) Partial Payment. If the assets of the Company are not sufficient to pay in full the liquidation preference plus any dividends which have been declared but not yet paid to all Holders and all holders of any Parity Stock, the amounts paid to the Holders and to the holders of all Parity Stock shall be pro rata in accordance with the respective aggregate liquidating distributions to which they would otherwise be entitled.
(c) Residual Distributions. If the respective aggregate liquidating distributions to which all Holders and all holders of any Parity Stock are entitled have been paid, the holders of Junior Stock shall be entitled to receive all remaining assets of the Company according to their respective rights and preferences.
(d) Merger, Consolidation and Sale of Assets Not Liquidation. For purposes of this Section 5, the sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the property and assets of the Company shall not be deemed a voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, nor shall the merger, consolidation or any other business combination transaction of the Company into or with any other corporation or person or the merger, consolidation or any other business combination transaction of any other corporation or person into or with the Company be deemed to be a voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company.
Section 6. Redemption.
(a) Optional Redemption. The Company, at the option of its Board of Directors, the Preferred Stock Committee or any other duly authorized committee thereof, may redeem out of funds legally available therefor, in whole or in part, the shares of Convertible Preferred Stock at the time outstanding, on any Dividend Payment Date as to which the Company has declared a dividend in full on the Convertible Preferred Stock on or after the Dividend Payment Date on February 15, 2015, upon notice given as provided in Section 6(b) below, and at a redemption price equal to $50,000 per share.
Notwithstanding the foregoing, the Company, at the option of its Board of Directors, the Preferred Stock Committee or any other duly authorized committee thereof, may redeem out of funds legally available therefor, at any time, in whole but not in part, the shares of Convertible Preferred Stock at the time outstanding if the aggregate liquidation preference of such shares is equal to 5% or less of the aggregate liquidation preference of the shares of Convertible Preferred Stock originally issued by the Company, upon notice as provided in Section 6(b) below, and at a redemption price equal to $50,000 per share, plus any accrued dividends thereon from the last dividend payment date to, but excluding, the date of redemption.
(b) Notice of Redemption. Notice of every redemption of shares of Convertible Preferred Stock shall be mailed by first class mail, postage prepaid, addressed to the Holders of such shares to be redeemed at their respective last addresses appearing on the stock register of the Company. Such mailing shall be at least 30 days and not more than 60 days before the date fixed for redemption. Any notice mailed as provided in this Section 6(b) shall be conclusively presumed to have been duly given, whether or not the Holder receives such notice, but failure duly to give such notice by mail, or any defect in such notice or in the mailing thereof, to any Holder of shares of Convertible Preferred Stock designated for redemption shall not affect the validity of the proceedings for the redemption of any other shares of Convertible Preferred Stock. Each notice shall state:
(i) the redemption date;
(ii) the number of shares of Convertible Preferred Stock to be redeemed and, if fewer than all the shares of a Holder are to be redeemed, the number of such shares to be redeemed;
(iii) the redemption price;
(iv) the place or places where the certificates for such shares are to be surrendered for payment of the redemption price; and
(v) that dividends on the shares to be redeemed will cease to accrue on the redemption date.
Notwithstanding the foregoing, if the Convertible Preferred Stock is held in book-entry form through DTC, the Company may give such notice in any manner permitted by DTC.
(c) Partial Redemption. In case of any redemption of only part of the shares of Convertible Preferred Stock at the time outstanding, the shares of Convertible Preferred Stock to be redeemed shall be selected pro rata from the Holders in proportion to the number of shares of Convertible Preferred Stock held by such Holders, by lot or in such other manner as the Board of Directors, the Preferred Stock Committee or any other duly authorized committee thereof may determine to be fair and equitable. Subject to the provisions of this Section 6, the Board of Directors, the Preferred Stock Committee or any other duly authorized committee thereof shall have full power and authority to prescribe the terms and conditions upon which shares of Convertible Preferred Stock shall be redeemed from time to time.
(d) Effectiveness of Redemption. If notice of redemption has been duly given and if on or before the redemption date specified in the notice all funds necessary for the redemption have been set aside by the Company, separate and apart from its other assets, in trust for the pro rata benefit of the Holders of the shares called for redemption, so as to be and continue to be available therefor, or deposited by the Company with a bank or trust company selected by the Board of Directors, the Preferred Stock Committee or any other duly authorized committee thereof (the “Trust”) in trust for the pro rata benefit of the Holders of the shares called for redemption, then, notwithstanding that any certificate for any share so called for redemption has not been surrendered for cancellation, on and after the redemption date all shares so called for redemption shall cease to be outstanding, all dividends with respect to such shares shall cease to accrue on such redemption date, and all rights with respect to such shares shall forthwith on such redemption date cease and terminate, except only the right of the Holders thereof to receive the amount payable on such redemption from the Trust at any time after the redemption date from the funds so deposited, without interest. The Company shall be entitled to receive, from time to time, from the Trust any interest accrued on such funds, and the Holders of any shares called for redemption shall have no claim to any such interest. Any funds so deposited and unclaimed at the end of three years from the redemption date shall, to the extent permitted by law, be released or repaid to the Company, and in the event of such repayment to the Company, the Holders of the shares so called for redemption shall be deemed to be unsecured creditors of the Company for an amount equivalent to the amount deposited as stated above for the redemption of such shares and so repaid to the Company, but shall in no event be entitled to any interest.
(e) Conversion Prior to Redemption. If the Convertible Preferred Stock has been called for redemption, a holder will be entitled to convert the Convertible Preferred Stock from the date of notice of the redemption until the close of business on the second Business Day immediately preceding the date of redemption.
Section 7. Right of the Holders to Convert.
Each Holder shall have the right, at such Holder’s option, to convert all or any portion of such Holder’s Convertible Preferred Stock at any time into shares of Common Stock at the Conversion Rate per share of Convertible Preferred Stock (subject to the conversion procedures of Section 8), plus cash in lieu of fractional shares.
Section 8. Conversion Procedures.
(a) Conversion Date. Effective immediately prior to the close of business on any applicable Conversion Date, dividends shall no longer be declared on any such converted shares of Convertible Preferred Stock and such shares of Convertible Preferred Stock shall cease to be outstanding, in each case, subject to the right of Holders to receive any declared and unpaid dividends on such shares and any other payments to which they are otherwise entitled pursuant to the terms hereof.
(b) Rights Prior to Conversion. No allowance or adjustment, except pursuant to Section 12, shall be made in respect of dividends payable to holders of the Common Stock of record as of any date prior to the close of business on any applicable Conversion Date. Prior to the close of business on any applicable Conversion Date, shares of Common Stock issuable upon conversion of, or other securities issuable upon conversion of, any shares of Convertible Preferred Stock shall not be deemed outstanding for any purpose, and Holders shall have no rights with respect to the Common Stock or other securities issuable upon conversion (including voting rights, rights to respond to tender offers for the Common Stock or other securities issuable upon conversion and rights to receive any dividends or other distributions on the Common Stock or other securities issuable upon conversion) by virtue of holding shares of Convertible Preferred Stock.
(c) Reacquired Shares. Shares of Convertible Preferred Stock duly converted in accordance with this Certificate of Designation, or otherwise reacquired by the Company, will resume the status of authorized and unissued preferred stock, undesignated as to series and available for future issuance. The Company may from time-to-time take such appropriate action as may be necessary to reduce the authorized number of shares of Convertible Preferred Stock.
(d) Record Holder as of Conversion Date. The Person or Persons entitled to receive the Common Stock and/or cash, securities or other property issuable upon conversion of Convertible Preferred Stock shall be treated for all purposes as the record holder(s) of such shares of Common Stock and/or securities as of the close of business on any applicable Conversion Date. In the event that a Holder shall not by written notice designate the name in which shares of Common Stock and/or cash, securities or other property (including payments of cash in lieu of fractional shares) to be issued or paid upon conversion of shares of Convertible Preferred Stock should be registered or paid or the manner in which such shares should be delivered, the Company shall be entitled to register and deliver such shares, and make such payment, in the name of the Holder and in the manner shown on the records of the Company or, in the case of global certificates, through book-entry transfer through the Depositary.
(e) Conversion Procedure. On the date of any conversion, if a Holder’s interest is in certificated form, a Holder must do each of the following in order to convert:
(i) complete and manually sign the conversion notice provided by the Conversion Agent, or a facsimile of the conversion notice, and deliver this irrevocable notice to the Conversion Agent;
(ii) surrender the shares of Convertible Preferred Stock to the Conversion Agent;
(iii) if required, furnish appropriate endorsements and transfer documents;
(iv) if required, pay any stock transfer, documentary, stamp or similar taxes not payable by the Company pursuant to Section 24; and
(v) if required, pay funds equal to any declared and unpaid dividend payable on the next Dividend Payment Date to which such Holder is entitled.
If a Holder’s interest is a beneficial interest in a global certificate representing Convertible Preferred Stock, in order to convert a Holder must comply with clauses (iii) through (v) listed above and comply with the Depositary’s procedures for converting a beneficial interest in a global security. The date on which a Holder complies with the procedures in this clause (ii) is the “Conversion Date.” The Conversion Agent shall, on a Holder’s behalf, convert the Convertible Preferred Stock into shares of Common Stock, in accordance with the terms of the notice delivered by such Holder described in clause (i) above.
Section 9. Conversion Upon Make-Whole Acquisition.
(a) Make-Whole Acquisition Conversion. In the event of a Make-Whole Acquisition, each Holder shall have the option to convert its shares of Convertible Preferred Stock (a “Make-Whole Acquisition Conversion”) during the period (the “Make-Whole Acquisition Conversion Period”) beginning on the effective date of the Make-Whole Acquisition (the “Make-Whole Acquisition Effective Date”) and ending on the date that is 30 days after the Make-Whole Acquisition Effective Date and receive an additional number of shares of Common Stock in the form of Make-Whole Shares as set forth in clause (b) below.
(b) Number of Make-Whole Shares. The number of “Make-Whole Shares” shall be determined for the Convertible Preferred Stock by reference to the table below for the applicable Make-Whole Acquisition Effective Date and the applicable Make-Whole Acquisition Stock Price:
| Stock Price | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Effective Date | $26.35 | $29.00 | $31.50 | $34.00 | $36.50 | $39.00 | $41.50 | $45.00 | $50.00 | $55.00 | $60.00 | $70.00 | $80.00 |
| January 17, 2008 | 415.0586 | 336.6450 | 280.8732 | 237.7517 | 203.8817 | 176.8906 | 155.0925 | 131.0448 | 105.8382 | 87.7535 | 74.3142 | 55.9120 | 44.0147 |
| February 15, 2009 | 415.0586 | 335.6342 | 277.8014 | 233.2029 | 198.3240 | 170.6875 | 148.5209 | 124.2930 | 99.2609 | 81.6261 | 68.7560 | 51.5750 | 40.7288 |
| February 15, 2010 | 407.7693 | 323.3739 | 263.5573 | 217.7120 | 182.0825 | 154.1127 | 131.9261 | 108.0402 | 83.9517 | 67.5097 | 55.8939 | 41.0257 | 32.1297 |
| February 15, 2011 | 395.7941 | 307.9461 | 245.7090 | 198.1091 | 161.3901 | 132.8521 | 110.5226 | 86.9818 | 64.1080 | 49.3099 | 39.4578 | 27.8596 | 21.5687 |
| February 15, 2012 | 381.2183 | 289.4432 | 223.9699 | 173.5976 | 134.6697 | 104.5878 | 61.4242 | 57.8404 | 36.6760 | 24.6960 | 17.9378 | 11.5860 | 9.0663 |
| February 15, 2013 | 357.8192 | 261.7929 | 193.6996 | 140.8052 | 98.3019 | 63.0255 | 33.5871 | 4.8144 | 0.0000 | 0.0000 | 0.0000 | 0.0000 | 0.0000 |
| February 15, 2014 | 332.5456 | 231.2139 | 162.2294 | 112.0320 | 74.8500 | 46.3888 | 24.1098 | 3.2856 | 0.0000 | 0.0000 | 0.0000 | 0.0000 | 0.0000 |
| February 15, 2015 | 305.5166 | 179.3119 | 85.2333 | 2.7684 | 0.0000 | 0.0000 | 0.0000 | 0.0000 | 0.0000 | 0.0000 | 0.0000 | 0 0000 | 0.0000 |
(i) The exact Make-Whole Acquisition Stock Prices and Make-Whole Acquisition Effective Dates may not be set forth on the table, in which case:
(A) if the Make-Whole Acquisition Stock Price is between two Make-Whole Acquisition Stock Price amounts on the table or the Make-Whole Acquisition Effective Dates are between two dates on the table, the number of Make-Whole Shares will be determined by straight-line interpolation between the number of Make-Whole Shares set forth for the higher and lower Make-Whole Acquisition Stock Price amounts and the two Make-Whole Acquisition Effective Dates, as applicable, based on a 365-day year;
(B) if the Make-Whole Acquisition Stock Price is in excess of $80.00 per share (subject to adjustment pursuant to Section 12), no Make-Whole Shares will be issued upon conversion of the Convertible Preferred Stock; and
(C) if the Make-Whole Acquisition Stock Price is less than $26.35 per share (subject to adjustment pursuant to Section 12), no Make-Whole Shares will be issued upon conversion of the Convertible Preferred Stock.
(ii) The Make-Whole Acquisition Stock Prices set forth in the table above are subject to adjustment pursuant to Section 12 and shall be adjusted as of any date the Conversion Rate is adjusted. The adjusted Make-Whole Acquisition Stock Prices will equal the Make-Whole Acquisition Stock Prices applicable immediately prior to such adjustment multiplied by a fraction, the numerator of which is the Conversion Rate immediately prior to the adjustment giving rise to the Make-Whole Acquisition Stock Prices adjustment and the denominator of which is the Conversion Rate as so adjusted. Each of the number of Make-Whole Shares in the table shall also be subject to adjustment in the same manner as the Conversion Rate pursuant to Section 12.
(c) Initial Make-Whole Acquisition Notice. On or before the twentieth day prior to the date on which the Company anticipates consummating the Make-Whole Acquisition (or, if later, promptly after the Company discovers that the Make-Whole Acquisition will occur), a written notice shall be sent by or on behalf of the Company, by first-class mail, postage prepaid, to the Holders as they appear in the records of the Company. Such notice shall contain:
(i) the date on which the Make-Whole Acquisition is anticipated to be effected, and whether such Make-Whole Acquisition is anticipated to be a Fundamental Change; and
(ii) the date, which shall be 30 days after the anticipated Make-Whole Acquisition Effective Date, by which the Make-Whole Acquisition Conversion option must be exercised.
(d) Second Make-Whole Acquisition Notice. On the Make-Whole Acquisition Effective Date, another written notice shall be sent by or on behalf of the Company, by first-class mail, postage prepaid, to the Holders as they appear in the records of the Company. Such notice shall contain:
(i) the date that shall be 30 days after the Make-Whole Acquisition Effective Date;
(ii) the number of Make-Whole Shares and, if such Make-Whole Acquisition is a Fundamental Change, the Base Price;
(iii) the amount of cash, securities and other consideration payable per share of Common Stock and Convertible Preferred Stock; and
(iv) the instructions a Holder must follow to exercise its conversion option in connection with such Make-Whole Acquisition, including pursuant to Section 10, if applicable.
(e) Make-Whole Acquisition Conversion Procedure. To exercise a Make-Whole Acquisition Conversion option, a Holder must, no later than 5:00 p.m., New York City time, on or before the date by which the Make-Whole Acquisition Conversion option must be exercised as specified in the notice delivered under clause (d) above, comply with the procedures set forth in Section 8(e) and indicate that it is exercising its Make-Whole Acquisition Conversion option.
(f) Unconverted Shares Remain Outstanding. If a Holder does not elect to exercise the Make-Whole Acquisition Conversion option pursuant to this Section 9, the shares of Convertible Preferred Stock or successor security held by it will remain outstanding (subject to such Holder electing to exercise its Fundamental Change conversion option, if any, in accordance with Section 10).
(g) Delivery Following Make-Whole Acquisition Conversion. Upon a Make-Whole Acquisition Conversion, the Conversion Agent shall, except as otherwise provided in the instructions provided by the Holder in the written notice provided to the Company or its successor as set forth in Section 8(d) above, deliver to the Holder such cash, securities or other property as are issuable with respect to Make-Whole Shares in the Make-Whole Acquisition.
(h) Partial Make-Whole Acquisition Conversion. In the event that a Make-Whole Acquisition Conversion is effected with respect to shares of Convertible Preferred Stock or a successor security representing less than all the shares of Convertible Preferred Stock or a successor security held by a Holder, upon such Make-Whole Acquisition Conversion the Company or its successor shall execute and the Conversion Agent shall, unless otherwise instructed in writing, countersign and deliver to such Holder, at the expense of the Company or its successors, a certificate evidencing the shares of Convertible Preferred Stock or such successor security held by the Holder as to which a Make-Whole Acquisition Conversion was not effected.
Section 10. Conversion Upon Fundamental Change.
(a) Fundamental Change Conversion. If the Reference Price in connection with a Make-Whole Acquisition is less than the Conversion Price (a “Fundamental Change”), a Holder may convert each share of Convertible Preferred Stock during the period beginning on the effective date of the Fundamental Change and ending on the date that is 30 days after the effective date of such Fundamental Change at an adjusted Conversion Price equal to the greater of (1) the Reference Price and (2) $18.45, subject to adjustment as described in clause (b) below (the “Base Price”).
(b) Base Price Adjustment. The Base Price shall be adjusted as of any date the Conversion Rate of the Convertible Preferred Stock is adjusted pursuant to Section 12. The adjusted Base Price shall equal the Base Price applicable immediately prior to such adjustment multiplied by a fraction, the numerator of which is the Conversion Rate immediately prior to the adjustment giving rise to the Base Price adjustment and the denominator of which is the Conversion Rate as so adjusted.
(c) Cash Alternative. In lieu of issuing Common Stock upon conversion in the event of a Fundamental Change, the Company may at its option, and if it obtains any necessary regulatory approval, pay an amount in cash (computed to the nearest cent) equal to the Reference Price for each share of Common Stock otherwise issuable upon conversion.
(d) Fundamental Change Conversion Procedure. To exercise its conversion option upon a Fundamental Change, a Holder must, no later than 5:00 p.m., New York City time, on or before the date by which the conversion option upon the Fundamental Change must be exercised as specified in the notice delivered under Section 9(d) above, comply with the procedures set forth in Section 8(e) and indicate that it is exercising its Fundamental Change conversion option.
(f) Unconverted Shares Remain Outstanding. If a Holder does not elect to exercise its conversion option upon a Fundamental Change pursuant to this Section 10, the shares of Convertible Preferred Stock or successor security held by it will remain outstanding (subject to such Holder electing to exercise its Make-Whole Acquisition Conversion option, if any, in accordance with Section 9).
(g) Delivery Following Fundamental Change Conversion. Upon a conversion upon a Fundamental Change, the Conversion Agent shall, except as otherwise provided in the instructions provided by the Holder in the written notice provided to the Company or its successor as set forth in Section 8(d) above, deliver to the Holder such cash, securities or other property as are issuable with respect to the adjusted Conversion Price following the Fundamental Change.
(h) Partial Fundamental Change Conversion. In the event that a conversion upon a Fundamental Change is effected with respect to shares of Convertible Preferred Stock or a successor security representing less than all the shares of Convertible Preferred Stock or a successor security held by a Holder, upon such conversion the Company or its successor shall execute and the Conversion Agent shall, unless otherwise instructed in writing, countersign and deliver to such Holder, at the expense of the Company, a certificate evidencing the shares of Convertible Preferred Stock or such successor security held by the Holder as to which a conversion upon a Fundamental Change was not effected.
Section 11. Conversion at the Option of the Company.
(a) Company Conversion Right. On or after February 15, 2013, the Company shall have the right, at its option, at any time or from time to time to cause some or all of the Convertible Preferred Stock to be converted into shares of Common Stock at the then-applicable Conversion Rate if, for 20 Trading Days within any period of 30 consecutive Trading Days ending on the Trading Day preceding the date the Company delivers a Notice of Conversion at the Option of the Company, the Closing Price of the Common Stock exceeds 130% of the then-applicable Conversion Price of the Convertible Preferred Stock.
(b) Partial Conversion. If the Company elects to cause less than all the shares of the Convertible Preferred Stock to be converted under clause (a) above, the Conversion Agent shall select the Convertible Preferred Stock to be converted on a pro rata basis, by lot or in such other manner as the Board of Directors, the Preferred Stock Committee or any other duly authorized committee thereof determines to be fair and equitable. If the Conversion Agent selects a portion of a Holder’s Convertible Preferred Stock for partial conversion at the option of the Company and such Holder converts a portion of its shares of Convertible Preferred Stock, the converted portion will be deemed to be from the portion selected for conversion at the option of the Company under this Section 11.
(c) Conversion Procedure. In order to exercise the conversion right described in this Section 11, the Company shall provide notice of such conversion to each Holder (such notice, a “Notice of Conversion at the Option of the Company”) The Conversion Date shall be a date selected by the Company (the “Conversion at the Option of the Company Date”) and shall be no more than 20 days after the date on which the Company provides such Notice of Conversion at the Option of the Company. In addition to any information required by applicable law or regulation, the Notice of Conversion at the Option of the Company shall state, as appropriate:
(i) the Conversion at the Option of the Company Date;
(ii) the number of shares of Common Stock to be issued upon conversion of each share of Convertible Preferred Stock and, if fewer than all the shares of a Holder are to be converted, the number of such shares to be converted; and
(iii) the number of shares of Convertible Preferred Stock to be converted.
Section 12. Anti-Dilution Adjustments.
(a) Adjustments. The Conversion Rate will be subject to adjustment, without duplication under the following circumstances:
(i) the issuance of Common Stock as a dividend or distribution to all holders of Common Stock, or a subdivision or combination of Common Stock, in which event the Conversion Rate will be adjusted based on the following formula:
| CR1 = CR0 x (OS1 / OS0) | ||
|---|---|---|
| where, | ||
| CR0 | = | the Conversion Rate in effect at the close of business on the Record Date |
| CR1 | = | the Conversion Rate in effect immediately after the Record Date |
| OS0 | = | the number of shares of Common Stock outstanding at the close of business on the Record Date prior to giving effect to such event |
| OS1 | = | the number of shares of Common Stock that would be outstanding immediately after, and solely as a result of, such event |
Notwithstanding the foregoing, no adjustment will be made for the issuance of Common Stock as a dividend or distribution to all holders of Common Stock that is made in lieu of a quarterly or annual cash dividend or distribution to such holders, to the extent such dividend or distribution does not exceed the applicable Dividend Threshold Amount. The amount of any such dividend or distribution will equal the number of such shares being issued multiplied by the average of the VWAP of the Common Stock over each of the five consecutive Trading Days prior to the Ex-date for such dividend or distribution.
(ii) the issuance to all holders of Common Stock of certain rights or warrants entitling them for a period expiring 60 days or less from the date of issuance of such rights or warrants to purchase shares of Common Stock (or securities convertible into Common Stock) at less than (or having a conversion price per share less than) the Current Market Price as of the Record Date, in which event each Conversion Rate will be adjusted based on the following formula:
| CR1 =CRox(OSo+X)/(OSo+Y) | ||
|---|---|---|
| where, | ||
| CR0 | = | the Conversion Rate in effect at the close of business on the Record Date |
| CR1 | = | the Conversion Rate in effect immediately after the Record Date |
| OS0 | = | the number of shares of Common Stock outstanding at the close of business on the Record Date |
| X | = | the total number of shares of Common Stock issuable pursuant to such rights (or upon conversion of such securities) |
| Y | = | the aggregate price payable to exercise such rights (or the conversion price for such securities paid upon conversion) divided by the average of the VWAP of the Common Stock over each of the ten consecutive Trading Days prior to the Business Day immediately preceding the announcement of the issuance of such rights. |
However, the Conversion Rate will be readjusted to the extent that any such rights or warrants are not exercised prior to their expiration.
(iii) the dividend or other distribution to all holders of Common Stock of shares of capital stock of the Company (other than common stock) or evidences of its indebtedness or its assets (excluding any dividend, distribution or issuance covered by clauses (i) or (ii) above or (iv) or (v) below) in which event the Conversion Rate will be adjusted based on the following formula:
| CR1 = CR0 x SP0 / (SP0-FMV) | ||
|---|---|---|
| where, | ||
| CR0 | = | the Conversion Rate in effect at the close of business on the Record Date |
| CR1 | = | the Conversion Rate in effect immediately after the Record Date |
| SP0 | = | the Current Market Price as of the Record Date |
| FMV | = | the fair market value (as determined by the Board of Directors) on the Record Date of the shares of capital stock of the Company, evidences of indebtedness or assets so distributed, expressed as an amount per share of Common Stock |
However, if the transaction that gives rise to an adjustment pursuant to this clause (iii) is one pursuant to which the payment of a dividend or other distribution on Common Stock consists of shares of capital stock of the Company of, or similar equity interests in, a subsidiary or other business unit of ours, (i.e., a spin-off) that are, or, when issued, will be, traded on a U.S. securities exchange or quoted on the Nasdaq Capital Market, then the Conversion Rate will instead be adjusted based on the following formula:
| CR1 = CR0 x (FMV0 + MP0)/MP0 | ||
|---|---|---|
| where, | ||
| CR0 | = | the Conversion Rate in effect at the close of business on the Record Date |
| CR1 | = | the Conversion Rate in effect immediately after the Record Date |
| FMV0 | = | the average of the VWAP of the capital stock of the Company or similar equity interests distributed to holders of Common Stock applicable to one share of Common Stock over each of the 10 consecutive Trading Days commencing on and including the third Trading Day after the date on which “ex-distribution trading” commences for such dividend or distribution on the NYSE or such other national or regional exchange or market on which Common Stock is then listed or quoted |
| MP0 | = | the average of the VWAP of the Common Stock over each of the 10 consecutive Trading Days commencing on and including the third Trading Day after the date on which “ex-distribution trading” commences for such dividend or distribution on the NYSE or such other national or regional exchange or market on which Common Stock is then listed or quoted |
(iv) the Company makes a distribution consisting exclusively of cash to all holders of Common Stock, excluding (a) any cash dividend on Common Stock to the extent that the aggregate cash dividend per share of Common Stock does not exceed (i) $0.32 in any fiscal quarter in the case of a quarterly dividend or (ii) $1.28 in the prior twelve months in the case of an annual dividend (each such number, the “Dividend Threshold Amount”), (b) any cash that is distributed as part of a distribution referred to in clause (iii) above, and (c) any consideration payable in connection with a tender or exchange offer made by the Company or any of its subsidiaries referred to in clause (v) below, in which event, the Conversion Rate will be adjusted based on the following formula:
| CR1 = CR0 x SP0/ (SP0 -C) | ||
|---|---|---|
| where, | ||
| CR0 | = | the Conversion Rate in effect at the close of business on the Record Date |
| CR1 | = | the Conversion Rate in effect immediately after the Record Date |
| SP0 | = | the Current Market Price as of the Record Date |
| C | = | the amount in cash per share the Company distributes to holders in the event of a regular quarterly or annual dividend, less the dividend threshold amount |
The dividend threshold amount is subject to adjustment on an inversely proportional basis whenever the Conversion Rate is adjusted, provided that no adjustment will be made to the dividend threshold amount for any adjustment made to the Conversion Rate pursuant to this clause (iv).
(v) the Company or one or more of its subsidiaries make purchases of Common Stock pursuant to a tender offer or exchange offer by the Company or a subsidiary of the Company for Common Stock to the extent that the cash and value of any other consideration included in the payment per share of Common Stock validly tendered or exchanged exceeds the VWAP per share of Common Stock on the Trading Day next succeeding the last date on which tenders or exchanges may be made pursuant to such tender or exchange offer (the “expiration date”), in which event the Conversion Rate will be adjusted based on the following formula:
| CR1 = CR0 x [(FMV + (SP1 x OS1)] / (SP1 x OS0) | ||
|---|---|---|
| where, | ||
| CR0 | = | the Conversion Rate in effect at the close of business on the expiration date |
| CR1 | = | the Conversion Rate in effect immediately after the expiration date |
| FMV | = | the fair market value (as determined by the Board of Directors), on the expiration date, of the aggregate value of all cash and any other consideration paid or payable for shares validly tendered or exchanged and not withdrawn as of the expiration date (the “Purchased Shares”) |
| OS1 | = | the number of shares of Common Stock outstanding as of the last time tenders or exchanges may be made pursuant to such tender or exchange offer (the “Expiration Time”) less any Purchased Shares |
| OS0 | = | the number of shares of Common Stock outstanding at the Expiration Time, including any Purchased Shares |
| SP1 | = | the average of the VWAP of the Common Stock over each of the ten consecutive Trading Days commencing with the Trading Day immediately after the expiration date. |
(b) Calculation of Adjustments. All adjustments to the Conversion Rate shall be calculated by the Company to the nearest 1/10,000th of one share of Common Stock (or if there is not a nearest 1/10,000th of a share, to the next lower 1/10,000th of a share). No adjustment to the Conversion Rate will be required unless such adjustment would require an increase or decrease of at least one percent; provided, however, that any such minor adjustments that are not required to be made will be carried forward and taken into account in any subsequent adjustment, and provided further that any such adjustment of less than one percent that has not been made will be made upon (x) the end of each fiscal year of the Company, (y) the date of any notice of redemption of the Convertible Preferred Stock in accordance with the provisions hereof or any notice of a Make-Whole Acquisition and (z) any Conversion Date.
(c) When No Adjustment Required.
(i) Except as otherwise provided in this Section 12, the Conversion Rate will not be adjusted for the issuance of Common Stock or any securities convertible into or exchangeable for Common Stock or carrying the right to purchase any of the foregoing or for the repurchase of Common Stock.
(ii) No adjustment of the Conversion Rate need be made as a result of: (A) the issuance of the rights; (B) the distribution of separate certificates representing the rights; (C) the exercise or redemption of the rights in accordance with any rights agreement; or (D) the termination or invalidation of the rights, in each case, pursuant to the Company’s stockholder rights plan existing on the date of hereof, as amended, modified, or supplemented from time to time, or any newly adopted stockholder rights plans; provided, however, that to the extent that the Company has a stockholder rights plan in effect on a Conversion Date (including the Company’s rights plan, if any, existing on the date hereof), the Holder shall receive, in addition to the shares of Common Stock, the rights under such rights plan, unless, prior to any such Conversion Date, the rights have separated from the Common Stock, in which case the Conversion Rate will be adjusted at the time of separation as if the Company made a distribution to all holders of Common Stock of shares of capital stock of the Company or evidences of its indebtedness or its assets as described in Section 12.01(a)(iii), subject to readjustment in the event of the expiration, termination or redemption of the rights.
(iii) No adjustment to the Conversion Rate need be made:
(A) upon the issuance of any shares of Common Stock pursuant to any present or future plan providing for the reinvestment of dividends or interest payable on securities of the Company and the investment of additional optional amounts in Common Stock under any plan;
(B) upon the issuance of any shares of Common Stock or options or rights to purchase those shares pursuant to any present or future employee, director or consultant benefit plan or program of or assumed by the Company or any of its subsidiaries; or
(C) upon the issuance of any shares of Common Stock pursuant to any option, warrant, right, or exercisable, exchangeable or convertible security outstanding as of the date the Convertible Preferred Stock was first issued.
(iv) No adjustment to the Conversion Rate need be made for a transaction referred to in Section 12.01 (a)(i), (ii), (iii), (iv) or (v) if Holders may participate in the transaction on a basis and with notice that the Board of Directors determines to be fair and appropriate in light of the basis and notice on which holders of Common Stock participate in the transaction.
(v) No adjustment to the Conversion Rate need be made for a change in the par value or no par value of the Common Stock.
(vi) No adjustment to the Conversion Rate will be made to the extent that such adjustment would result in the Conversion Price being less than the par value of the Common Stock.
(vii) Notwithstanding any other provision herein to the contrary, in the event of an adjustment pursuant to Section 12.01(a)(iv) or (v), in no event will the conversion rate following such adjustment exceed 1,897.4084, subject to adjustment pursuant to Section 12.01 (a)(i), (ii) or (iii).
(d) Record Date. For purposes of this Section 12, “Record Date” means, with respect to any dividend, distribution or other transaction or event in which the holders of the Common Stock have the right to receive any cash, securities or other property or in which the Common Stock (or other applicable security) is exchanged for or converted into any combination of cash, securities or other property, the date fixed for determination of holders of the Common Stock entitled to receive such cash, securities or other property (whether such date is fixed by the Board of Directors or by statute, contract or otherwise).
(e) Successive Adjustments. After an adjustment to the Conversion Rate under this Section 12, any subsequent event requiring an adjustment under this Section 12 shall cause an adjustment to such Conversion Rate as so adjusted.
(f) Multiple Adjustments. For the avoidance of doubt, if an event occurs that would trigger an adjustment to the Conversion Rate pursuant to this Section 12 under more than one subsection hereof, such event, to the extent fully taken into account in a single adjustment, shall not result in multiple adjustments hereunder.
(g) Other Adjustments. The Company may, but shall not be required to, make such increases in the Conversion Rate, in addition to those required by this Section, as the Board of Directors considers to be advisable in order to avoid or diminish any income tax to any holders of shares of Common Stock resulting from any dividend or distribution of stock or issuance of rights or warrants to purchase or subscribe for stock or from any event treated as such for income tax purposes or for any other reason.
(h) Notice of Adjustments. Whenever a Conversion Rate is adjusted as provided under Section 12, the Company shall within 10 Business Days following the occurrence of an event that requires such adjustment (or if the Company is not aware of such occurrence, as soon as reasonably practicable after becoming so aware) or the date the Company makes an adjustment pursuant to Section 12(g):
(i) compute the adjusted applicable Conversion Rate in accordance with Section 12 and prepare and transmit to the Conversion Agent an Officers’ Certificate setting forth the applicable Conversion Rate, as the case may be, the method of calculation thereof in reasonable detail, and the facts requiring such adjustment and upon which such adjustment is based; and
(ii) provide a written notice to the Holders of the occurrence of such event and a statement in reasonable detail setting forth the method by which the adjustment to the applicable Conversion Rate was determined and setting forth the adjusted applicable Conversion Rate.
(i) Conversion Agent. The Conversion Agent shall not at any time be under any duty or responsibility to any Holder to determine whether any facts exist that may require any adjustment of the applicable Conversion Rate or with respect to the nature or extent or calculation of any such adjustment when made, or with respect to the method employed in making the same. The Conversion Agent shall be fully authorized and protected in relying on any Officers’ Certificate delivered pursuant to Section 12(h) and any adjustment contained therein and the Conversion Agent shall not be deemed to have knowledge of any adjustment unless and until it has received such certificate. The Conversion Agent shall not be accountable with respect to the validity or value (or the kind or amount) of any shares of Common Stock, or of any securities or property, that may at the time be issued or delivered with respect to any Convertible Preferred Stock; and the Conversion Agent makes no representation with respect thereto. The Conversion Agent shall not be responsible for any failure of the Company to issue, transfer or deliver any shares of Common Stock pursuant to a conversion of
Convertible Preferred Stock or to comply with any of the duties, responsibilities or covenants of the Company contained in this Section 12.
(j) Fractional Shares. No fractional shares of Common Stock will be issued to holders of the Convertible Preferred Stock upon conversion. In lieu of fractional shares otherwise issuable, holders will be entitled to receive an amount in cash equal to the fraction of a share of Common Stock, calculated on an aggregate basis in respect of the shares of Convertible Preferred Stock being converted, multiplied by the Closing Price of the Common Stock on the Trading Day immediately preceding the applicable Conversion Date.
Section 13. Adjustment for Reorganization Events.
(a) Reorganization Events. In the event of:
(1) any consolidation or merger of the Company with or into another person (other than a merger or consolidation in which the Company is the continuing corporation and in which the shares of Common Stock outstanding immediately prior to the merger or consolidation are not exchanged for cash, securities other property of the Company or another corporation);
(2) any sale, transfer, lease or conveyance to another person of all or substantially all the property and assets of the Company; or
(3) any statutory exchange of securities of the Company with another Person (other than in connection with a merger or acquisition) or any binding share exchange which reclassifies or changes its outstanding Common Stock; each of which is referred to as a “Reorganization Event,” each share of the Convertible Preferred Stock outstanding immediately prior to such Reorganization Event will, without the consent of the holders of the Convertible Preferred Stock, become convertible into the kind and amount of securities, cash and other property (the “Exchange Property”) receivable in such Reorganization Event (without any interest thereon, and without any right to dividends or distribution thereon which have a record date that is prior to the applicable Conversion Date) per share of Common Stock by a holder of Common Stock that is not a Person with which the Company consolidated or into which the Company merged or which merged into the Company or to which such sale or transfer was made, as the case may be (any such Person, a “Constituent Person”), or an Affiliate of a Constituent Person to the extent such Reorganization Event provides for different treatment of Common Stock held by Affiliates of the Company and non-Affiliates; provided that if the kind or amount of securities, cash and other property receivable upon such Reorganization Event is not the same for each share of Common Stock held immediately prior to such Reorganization Event by a Person other than a Constituent Person or an Affiliate thereof, then for the purpose of this Section 13(a), the kind and amount of securities, cash and other property receivable upon such Reorganization Event will be deemed to be the weighted average of the types and amounts of consideration received by the holders of Common Stock that affirmatively make an election (or of all such holders if none make an election). On each Conversion Date following a Reorganization Event, the Conversion Rate then in effect will be applied to the value on such Conversion Date of such securities, cash or other property received per share of Common Stock, as determined in accordance with this Section 13.
(b) Exchange Property Election. In the event that holders of the shares of Common Stock have the opportunity to elect the form of consideration to be received in such transaction, the consideration that the Holders are entitled to receive shall be deemed to be the types and amounts of consideration received by the holders of the shares of Common Stock that affirmatively make an election (or of all such holders if none make an election). The amount of Exchange Property receivable upon conversion of any Convertible Preferred Stock in accordance with the terms hereof shall be determined based upon the Conversion Rate in effect on such Conversion Date.
(c) Successive Reorganization Events. The above provisions of this Section 13 shall similarly apply to successive Reorganization Events and the provisions of Section 12 shall apply to any shares of capital stock of the Company (or any successor) received by the holders of the Common Stock in any such Reorganization Event.
(d) Reorganization Event Notice. The Company (or any successor) shall, within 20 days of the occurrence of any Reorganization Event, provide written notice to the Holders of such occurrence of such event and of the kind and amount of the cash, securities or other property that constitutes the Exchange Property. Failure to deliver such notice shall not affect the operation of this Section 13.
Section 14. Voting Rights.
(a) General. The Holders shall not be entitled to vote on any matter except as set forth in Section 14(b) below or as required by Delaware law.
(b) Special Voting Right.
(i) Voting Right. If and whenever dividends on the Convertible Preferred Stock or any other class or series of preferred stock that ranks on parity with Convertible Preferred Stock as to payment of dividends, and upon which voting rights equivalent to those granted by this Section 14(b)(i) have been conferred and are exercisable, have not been paid in an aggregate amount equal, as to any class or series, to at least six quarterly Dividend Periods (whether consecutive or not) (a “Nonpayment”), the number of directors constituting the Board of Directors shall be increased by two, and the Holders (together with holders of any class or series of the Company’s authorized preferred stock having equivalent voting rights), shall have the right, voting separately as a single class without regard to class or series (and with voting rights allocated pro rata based on the liquidation preference of each such class or series), to the exclusion of the holders of Common Stock, to elect two directors of the Company to fill such newly created directorships (and to fill any vacancies in the terms of such directorships), provided that the Holders and the holders of any such other class or series shall not be entitled to elect such directors to the extent such election would cause the Company to violate the corporate governance requirements of the New York Stock Exchange (or other exchange on which the Company’s securities may be listed) that listed companies must have a majority of independent directors, and further provided that the Board of Directors shall at no time include more than two such directors. Each such director elected by the Holders and any other class or series of preferred stock that ranks on parity with the Convertible Preferred Stock as to payment of dividends and having equivalent voting rights is a “Preferred Stock Director.”
(ii) Election. The election of the Preferred Stock Directors will take place at any annual meeting of stockholders or any special meeting of the Holders and any other class or series of stock of the Company that ranks on parity with Convertible Preferred Stock as to payment of dividends and having equivalent voting rights and for which dividends have not been paid, called as provided herein. At any time after the special voting power has vested pursuant to Section 14(b)(i) above, the secretary of the Company may, and upon the written request of the Holders of at least 20% of the Convertible Preferred Stock or the holders of at least 20% of such other series (addressed to the secretary at the Company’s principal office) must (unless such request is received less than 90 days before the date fixed for the next annual or special meeting of the stockholders, in which event such election shall be held at such next annual or special meeting of stockholders), call a special meeting of the Holders and any other class or series of preferred stock that ranks on parity with Convertible Preferred Stock as to payment of dividends and having equivalent voting rights and for which dividends have not been paid for the election of the two directors to be elected by them as provided in Section 14(b)(iii) below. The Preferred Stock Directors shall each be entitled to one vote per director on any matter.
(iii) Notice of Special Meeting. Notice for a special meeting will be given in a similar manner to that provided in the Company’s by-laws for a special meeting of the stockholders. If the secretary of the Company does not call a special meeting within 20 days after receipt of any such request, then any Holder may (at the expense of the Company) call such meeting, upon notice as provided in this Section 14(b)(iii), and for that purpose will have access to the stock register of the Company. The Preferred Stock Directors elected at any such special meeting will hold office until the next annual meeting of the stockholders of the Company unless they have been previously terminated or removed pursuant to Section 14(b)(iv). In case any vacancy in the office of a Preferred Stock Director occurs (other than prior to the initial election of the Preferred Stock Directors), the vacancy may be filled by the written consent of the Preferred Stock Director remaining in office, or if none remains in office, by the vote of the Holders (together with holders of any other class of the Company’s authorized preferred stock having equivalent voting rights, whether or not the holders of such preferred stock would be entitled to vote for the election of directors if such default in dividends did not exist) to serve until the next annual meeting of the stockholders.
(iv) Termination; Removal. Whenever the Company has paid full dividends for at least four consecutive quarterly dividend periods following a Nonpayment on the Convertible Preferred Stock and any other class or series of non-cumulative preferred stock ranking on parity with Convertible Preferred Stock as to payment of dividends, if any, and has paid cumulative dividends in full on any class or series of cumulative preferred stock ranking on parity with the Convertible Preferred Stock as to payment of dividends (in each case, upon which equivalent voting rights to those set forth in Section 14(b)(iii) have been conferred and are exercisable), then the right of the Holders to elect the Preferred Stock Directors will cease (but subject always to the same provisions for the vesting of the special voting rights in the case of any similar non-payment of dividends in respect of future Dividend Periods). The terms of office of the Preferred Stock Directors will immediately terminate, and the number of directors constituting the Board of Directors will be reduced accordingly. Any Preferred Stock Director may be removed at any time without cause by the Holders of a majority of the outstanding shares of
the Convertible Preferred Stock (together with holders of any other class of the Company’s authorized preferred stock having equivalent voting rights, whether or not the holders of such preferred stock would be entitled to vote for the election of directors if such default in dividends did not exist) when they have the voting rights described in this Section 14(b).
(c) Senior Issuances; Adverse Changes. So long as any shares of Convertible Preferred Stock are outstanding, the vote or consent of the Holders of at least two-thirds of the shares of Convertible Preferred Stock at the time outstanding, voting as a class with all other series of preferred stock ranking equally with the Convertible Preferred Stock and entitled to vote thereon, given in person or by proxy, either in writing without a meeting or by vote at any meeting called for the purpose, will be necessary for effecting or validating any of the following actions, whether or not such approval is required by Delaware law:
(i) any amendment, alteration or repeal of any provision of the Company’s Certificate of Incorporation (including the certificate of designation creating the Convertible Preferred Stock) or the Company’s by-laws that would alter or change the voting powers, preferences or special rights of the Convertible Preferred Stock so as to affect them adversely;
(ii) any amendment or alteration of the Company’s certificate of incorporation to authorize or create, or increase the authorized amount of, any shares of, or any securities convertible into shares of, any class or series of the Company’s capital stock ranking prior to the Convertible Preferred Stock in the payment of dividends or in the distribution of assets on any liquidation, dissolution or winding-up of the Company; or
(iii) the consummation of a binding share exchange or reclassification involving the Convertible Preferred Stock or a merger or consolidation of the Company with another entity, except that holders of Convertible Preferred Stock will have no right to vote under this provision or otherwise under Delaware law if in each case (i) the Convertible Preferred Stock remains outstanding or, in the case of any such merger or consolidation with respect to which the Company is not the surviving or resulting entity, is converted into or exchanged for preferred securities of the surviving or resulting entity or its ultimate parent, that is an entity organized and existing under the laws of the United States of America, any state thereof or the District of Columbia and that is a corporation for U.S. federal income tax purposes (or if such entity is not a corporation, the Company having received an opinion of nationally recognized counsel experienced in such matters to the effect that Holders will be subject to tax for U.S. federal income tax purposes with respect to such new preferred securities after such merger or consolidation in the same amount, at the same time and otherwise in the same manner as would have been the case under the Convertible Preferred Stock prior to such merger or consolidation), and (ii) such Convertible Preferred Stock remaining outstanding or such preferred securities, as the case may be, have such rights, preferences, privileges and voting powers, taken as a whole, as are not materially less favorable to the holders thereof than the rights, preferences, privileges and voting powers of the Convertible Preferred Stock, taken as a whole;
provided, however, that any increase in the amount of the authorized or issued Convertible Preferred Stock or authorized preferred stock or any securities convertible into preferred stock or the creation and issuance, or an increase in the authorized or issued amount, of other series of preferred stock or any securities convertible into preferred stock ranking equally with and/or junior to the Convertible Preferred Stock with respect to the payment of dividends (whether such dividends are cumulative or non-cumulative) and/or the distribution of assets upon the Company’s liquidation, dissolution or winding up will not be deemed to adversely affect the voting powers, preferences or special rights of the Convertible Preferred Stock and Holders will have no right to vote on such an increase, creation or issuance.
If any amendment, alteration, repeal, share exchange, reclassification, merger or consolidation specified in this Section 14(c) would adversely affect one or more but not all series of preferred stock of the Company, then only such series of preferred stock as are adversely affected by and entitled to vote on the matter shall vote on the matter together as a single class (in lieu of all other series of preferred stock).
(d) No Vote if Redemption. No vote or consent of the Holders shall be required pursuant to Section 14(b) or (c) if, at or prior to the time when the act with respect to such vote or consent would otherwise be required shall be effected, the Company shall have redeemed or shall have called for redemption all outstanding shares of Convertible Preferred Stock, with proper notice and sufficient funds having been set aside for such redemption, in each case pursuant to Section 6 above.
Section 15. Preemption.
The Holders shall not have any rights of preemption.
Section 16. Rank.
Notwithstanding anything set forth in the Certificate of Incorporation or this Certificate of Designation to the contrary, the Board of Directors, the Preferred Stock Committee or any other duly authorized committee thereof, without the vote of the Holders, may authorize and issue additional shares of Junior Stock or Parity Stock.
Section 17. Repurchase.
Subject to the limitations imposed herein, the Company may purchase and sell Convertible Preferred Stock from time to time to such extent, in such manner, and upon such terms as the Board of Directors, the Preferred Stock Committee or any other duly authorized committee thereof may determine; provided, however, that the Company shall not use any of its funds for any such purchase when there are reasonable grounds to believe that the Company is, or by such purchase would be rendered insolvent; provided, further, however, that in the event that the Company beneficially owns any Convertible Preferred Stock, the Company will procure that voting rights in respect of such Convertible Preferred Stock are not exercised.
Section 18. Unissued or Reacquired Shares.
Shares of Convertible Preferred Stock not issued or which have been issued and converted, redeemed or otherwise purchased or acquired by the Company shall be restored to the status of authorized but unissued shares of preferred stock without designation as to series.
Section 19. No Sinking Fund.
Shares of Convertible Preferred Stock are not subject to the operation of a sinking fund.
Section 20. Reservation of Common Stock.
(a) Sufficient Shares. The Company shall at all times reserve and keep available out of its authorized and unissued Common Stock or shares acquired by the Company, solely for issuance upon the conversion of shares of Convertible Preferred Stock as provided in this Certificate of Designation, free from any preemptive or other similar rights, such number of shares of Common Stock as shall from time to time be issuable upon the conversion of all the shares of Convertible Preferred Stock then outstanding, assuming that the Conversion Price equaled the Base Price. For purposes of this Section 20(a), the number of shares of Common Stock that shall be deliverable upon the conversion of all outstanding shares of Convertible Preferred Stock shall be computed as if at the time of computation all such outstanding shares were held by a single Holder.
(b) Use of Acquired Shares. Notwithstanding the foregoing, the Company shall be entitled to deliver upon conversion of shares of Convertible Preferred Stock, as herein provided, shares of Common Stock acquired by the Company (in lieu of the issuance of authorized and unissued shares of Common Stock), so long as any such acquired shares are free and clear of all liens, charges, security interests or encumbrances (other than liens, charges, security interests and other encumbrances created by the Holders).
(c) Free and Clear Delivery. All shares of Common Stock delivered upon conversion of the Convertible Preferred Stock shall be duly authorized, validly issued, fully paid and non-assessable, free and clear of all liens, claims, security interests and other encumbrances (other than liens, charges, security interests and other encumbrances created by the Holders).
(d) Compliance with Law. Prior to the delivery of any securities that the Company shall be obligated to deliver upon conversion of the Convertible Preferred Stock, the Company shall use its reasonable best efforts to comply with all federal and state laws and regulations thereunder requiring the registration of such securities with, or any approval of or consent to the delivery thereof by, any governmental authority.
(e) Listing. The Company hereby covenants and agrees that, if at any time the Common Stock shall be listed on the New York Stock Exchange or any other national securities exchange or automated quotation system, the Company will, if permitted by the rules of such exchange or automated quotation system, list and keep listed, so long as the Common Stock shall be so listed on such exchange or automated quotation system, all the Common Stock issuable upon conversion of the Convertible Preferred Stock; provided, however, that if the rules of such exchange or automated quotation system require the Company to defer the listing of such Common Stock until the first conversion of Convertible Preferred Stock into Common Stock in accordance with the provisions hereof, the Company covenants to list
such Common Stock issuable upon conversion of the Convertible Preferred Stock in accordance with the requirements of such exchange or automated quotation system at such time.
Section 21. Transfer Agent, Conversion Agent, Registrar and Paying Agent.
The duly appointed Transfer Agent, Conversion Agent, Registrar and paying agent for the Convertible Preferred Stock shall be The Bank of New York Mellon. The Company may, in its sole discretion, remove the Transfer Agent in accordance with the agreement between the Company and the Transfer Agent; provided that the Company shall appoint a successor transfer agent who shall accept such appointment prior to the effectiveness of such removal. Upon any such removal or appointment, the Company shall send notice thereof by first-class mail, postage prepaid, to the Holders.
Section 22. Replacement Certificates.
(a) Mutilated, Destroyed, Stolen and Lost Certificates. If physical certificates are issued, the Company shall replace any mutilated certificate at the Holder’s expense upon surrender of that certificate to the Transfer Agent. The Company shall replace certificates that become destroyed, stolen or lost at the Holder’s expense upon delivery to the Company and the Transfer Agent of satisfactory evidence that the certificate has been destroyed, stolen or lost, together with any indemnity that may be required by the Transfer Agent and the Company.
(b) Certificates Following Conversion. If physical certificates are issued, the Company shall not be required to issue any certificates representing the Convertible Preferred Stock on or after the applicable Conversion Date. In place of the delivery of a replacement certificate following the applicable Conversion Date, the Transfer Agent, upon delivery of the evidence and indemnity described in clause (a) above, shall deliver the shares of Common Stock pursuant to the terms of the Convertible Preferred Stock formerly evidenced by the certificate.
Section 23. Form.
(a) Global Preferred Stock. Convertible Preferred Stock may be issued in the form of one or more permanent global shares of Convertible Preferred Stock in definitive, fully registered form with a global legend in substantially the form attached hereto as Exhibit A (each, a “Global Preferred Stock”), which is hereby incorporated in and expressly made a part of this Certificate of Designation. The Global Preferred Stock may have notations, legends or endorsements required by law, stock exchange rules, agreements to which the Company is subject, if any, or usage (provided that any such notation, legend or endorsement is in a form acceptable to the Company). The aggregate number of shares represented by each Global Preferred Stock may from time to time be increased or decreased by adjustments made on the records of the Registrar and the Depositary or its nominee as hereinafter provided. This Section 23(a) shall apply only to a Global Preferred Stock deposited with or on behalf of the Depositary.
(b) Delivery to Depositary. If Global Preferred Stock is issued, the Company shall execute and the Registrar shall, in accordance with this Section, countersign and deliver initially one or more Global Preferred Stock that (i) shall be registered in the name of Cede & Co. or other nominee of the Depositary and (ii) shall be delivered by the Registrar to the Depositary or pursuant to instructions received from the Depositary or held by the Registrar as custodian for the Depositary pursuant to an agreement between the Depositary and the Registrar.
(c) Agent Members. If Global Preferred Stock is issued, members of, or participants in, the Depositary (“Agent Members”) shall have no rights under this Certificate of Designation with respect to any Global Preferred Stock held on their behalf by the Depositary or by the Registrar as the custodian of the Depositary or under such Global Preferred Stock, and the Depositary may be treated by the Company, the Registrar and any agent of the Company or the Registrar as the absolute owner of such Global Preferred Stock for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Registrar or any agent of the Company or the Registrar from giving effect to any written certification, proxy or other authorization furnished by the Depositary or impair, as between the Depositary and its Agent Members, the operation of customary practices of the Depositary governing the exercise of the rights of a holder of a beneficial interest in any Global Preferred Stock. If Global Preferred Stock is issued, the Depositary may grant proxies or otherwise authorize any Person to take any action that a Holder is entitled to take pursuant to the Convertible Preferred Stock, this Certificate of Designation or the Certificate of Incorporation.
(d) Physical Certificates. Owners of beneficial interests in any Global Preferred Stock shall not be entitled to receive physical delivery of certificated shares of Convertible Preferred Stock, unless (x) the Depositary has notified the Company that it is unwilling or unable to continue as Depositary for the Global Preferred Stock and the Company does not appoint a qualified replacement for the Depositary within 90 days, (y) the Depositary ceases to be a “clearing agency” registered under the Exchange Act and the Company does not appoint a qualified replacement for the
Depositary within 90 days or (z) the Company decides to discontinue the use of book-entry transfer through the Depositary. In any such case, the Global Preferred Stock shall be exchanged in whole for definitive shares of Convertible Preferred Stock in registered form, with the same terms and of an equal aggregate Liquidation Preference. Such definitive shares of Convertible Preferred Stock shall be registered in the name or names of the Person or Persons specified by the Depositary in a written instrument to the Registrar.
(e) Signature. An Officer shall sign any Global Preferred Stock for the Company, in accordance with the Company’s by-laws and applicable law, by manual or facsimile signature. If an Officer whose signature is on a Global Preferred Stock no longer holds that office at the time the Transfer Agent countersigned the Global Preferred Stock, the Global Preferred Stock shall be valid nevertheless. A Global Preferred Stock shall not be valid until an authorized signatory of the Transfer Agent manually countersigns Global Preferred Stock. Each Global Preferred Stock shall be dated the date of its countersignature.
Section 24. Taxes.
(a) Transfer Taxes. The Company shall pay any and all stock transfer, documentary, stamp and similar taxes that may be payable in respect of any issuance or delivery of shares of Convertible Preferred Stock or shares of Common Stock or other securities issued on account of Convertible Preferred Stock pursuant hereto or certificates representing such shares or securities. The Company shall not, however, be required to pay any such tax that may be payable in respect of any transfer involved in the issuance or delivery of shares of Convertible Preferred Stock, shares of Common Stock or other securities in a name other than that in which the shares of Convertible Preferred Stock with respect to which such shares or other securities are issued or delivered were registered, or in respect of any payment to any Person other than a payment to the registered holder thereof, and shall not be required to make any such issuance, delivery or payment unless and until the Person otherwise entitled to such issuance, delivery or payment has paid to the Company the amount of any such tax or has established, to the satisfaction of the Company, that such tax has been paid or is not payable.
(b) Withholding. All payments and distributions (or deemed distributions) on the shares of Convertible Preferred Stock (and on the shares of Common Stock received upon their conversion) shall be subject to withholding and backup withholding of tax to the extent required by law, subject to applicable exemptions, and amounts withheld, if any, shall be treated as received by Holders.
Section 25. Notices.
All notices referred to herein shall be in writing, and, unless otherwise specified herein, all notices hereunder shall be deemed to have been given upon the earlier of receipt thereof or three Business Days after the mailing thereof if sent by registered or certified mail (unless first class mail shall be specifically permitted for such notice under the terms of this Certificate of Designation) with postage prepaid, addressed: (i) if to the Company, to its office at 399 Park Avenue, New York, New York 10043 (Attention: Corporate Secretary) or to the Transfer Agent at its office at 101 Barclay Street, New York, NY 10286 (Attention: Corporate Trust Office), or other agent of the Company designated as permitted by this Certificate of Designation, or (ii) if to any Holder, to such Holder at the address of such Holder as listed in the stock record books of the Company (which may include the records of the Transfer Agent) or (iii) to such other address as the Company or any such Holder, as the case may be, shall have designated by notice similarly given.
Exhibit A
FORM OF 6.5% NON-CUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES T
FACE OF SECURITY
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION UNDER THE SECURITIES ACT. BY ITS ACQUISITION HEREOF, THE HOLDER AGREES TO OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY PRIOR TO THE DATE THAT IS ONE YEAR AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH CITIGROUP INC. (THE “COMPANY”) OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) (THE “RESALE RESTRICTION TERMINATION DATE”) ONLY (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS SHARES OF THE CONVERTIBLE PREFERRED STOCK ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, OR (D) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY’S AND THE TRANSFER AGENT’S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE (D) PRIOR TO THE RESALE RESTRICTION TERMINATION DATE TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATIONS AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRANSFER AGENT. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.
[IF GLOBAL PREFERRED STOCK IS ISSUED: UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO., OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO. HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR’S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE CERTIFICATE OF DESIGNATION REFERRED TO BELOW.]
IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH REGISTRAR AND TRANSFER AGENT MAY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.
| Certificate Number | Number of Shares of Convertible Preferred Stock |
|---|---|
| CUSIP NO.: |
CITIGROUP INC.
6.5% Non-Cumulative Convertible Preferred Stock, Series T (par value $1.00 per share) (liquidation preference $50,000 per share)
Citigroup Inc., a Delaware corporation (the “Company”), hereby certifies that [ ] (the “Holder”) is the registered owner of [ ](1) [ , or such number as is indicated in the records of the Registrar and the Depository,](2) fully paid and non-assessable shares of the Company’s designated 6.5% Non-Cumulative Convertible Preferred Stock, Series T, with a par value of $1.00 per share and a liquidation preference of $50,000 per share (the “Convertible Preferred Stock”). The shares of Convertible Preferred Stock are transferable on the books and records of the Registrar, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer. The designations, rights, privileges, restrictions, preferences and other terms and provisions of the Convertible Preferred Stock represented hereby are and shall in all respects be subject to the provisions of the Certificate of Designation dated January 18, 2008 as the same may be amended from time to time (the “Certificate of Designation”). Capitalized terms used herein but not defined shall have the meaning given them in the certificate of Designation. The Company will provide a copy of the Certificate of Designation to a Holder without charge upon written request to the Company at its principal place of business.
Reference is hereby made to select provisions of the Convertible Preferred Stock set forth on the reverse hereof, and to the Certificate of Designation, which select provisions and the Certificate of Designation shall for all purposes have the same effect as if set forth at this place.
Upon receipt of this certificate, the Holder is bound by the Certificate of Designation and is entitled to the benefits thereunder.
Unless the Registrar has properly countersigned, these shares of Convertible Preferred Stock shall not be entitled to any benefit under the Certificate of Designation or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, this certificate has been executed on behalf of the Company by its [Title] this day of , .
| CITIGROUP INC. |
|---|
| By: |
| Name: |
| Title: |
(1) This phrase should be included only if the share certificate evidences certificated shares of Convertible Preferred Stock.
(2) This phrase should be included only if the share certificate evidences Global Preferred Stock.
REGISTRAR’S COUNTERSIGNATURE
These are shares of Convertible Preferred Stock referred to in the within-mentioned Certificate of Designation.
Dated:
| THE BANK OF NEW YORK MELLON, as Registrar |
|---|
| By: |
| Name: |
| Title: |
REVERSE OF CERTIFICATE
Dividends on each share of Convertible Preferred Stock shall be payable at the rate provided in the Certificate of Designation.
The shares of Convertible Preferred Stock shall be convertible in the manner and accordance with the terms set forth in the Certificate of Designation.
The shares of Convertible Preferred Stock shall be redeemable at the option of the Company in the manner and in accordance with the terms set forth in the Certificate of Designation.
The Company shall furnish without charge to each holder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class or series of share capital issued by the Company and the qualifications, limitations or restrictions of such preferences and/or rights.
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers the shares of Convertible Preferred Stock evidenced hereby to:
________________________________________________________________
________________________________________________________________
(Insert assignee’s social security or taxpayer identification number, if any)
________________________________________________________________
________________________________________________________________
(Insert address and zip code of assignee) and irrevocably appoints:
________________________________________________________________
as agent to transfer the shares of Convertible Preferred Stock evidenced hereby on the books of the Transfer Agent. The agent may substitute another to act for him or her.
| Date: |
|---|
| Signature: |
| (Sign exactly as your name appears on the other side of this Certificate) |
| Signature Guarantee: |
(Signature must be guaranteed by an “eligible guarantor institution” that is a bank, stockbroker, savings and loan association or credit union meeting the requirements of the Transfer Agent, which requirements include membership or participation in the Securities Transfer Agents Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Transfer Agent in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.)
CERTIFICATE OF INCREASE
OF
SERIES R CUMULATIVE PARTICIPATING PREFERRED STOCK
OF
CITIGROUP INC.
(Pursuant to Section 151 of the General Corporation Law of the State of Delaware)
CITIGROUP INC. (the “Company”), a corporation organized and existing under the General Corporation Law of the State of Delaware, in accordance with the provisions of Section 151(g) thereof, DOES HEREBY CERTIFY:
That pursuant to authority conferred upon the Preferred Stock Committee of the Board of Directors of the Company, the Preferred Stock Committee adopted on February 8, 2010 the following resolution relating to the number of authorized shares of Series R Cumulative Participating Preferred Stock of the Company:
RESOLVED, that the authorized number of shares of the Company’s Series R Cumulative Participating Preferred Stock is hereby increased from 28,000 shares to 31,000 shares, and that the appropriate officers of the Company be and hereby are authorized and directed in the name and on behalf of the Company to execute and file a Certificate of Increase with the Secretary of State of the State of Delaware increasing the number of shares constituting the Series R Cumulative Participating Preferred Stock to 31,000 shares and to take any and all other actions deemed necessary or appropriate to effectuate this resolution.
IN WITNESS WHEREOF, the Company has caused this Certificate of Increase to be executed by its duly authorized officer on this 8th day of February, 2010.
| CITIGROUP INC. | ||
|---|---|---|
| By: | /s/ Martin A. Waters | |
| Name: | Martin A. Waters | |
| Title: | Assistant Treasurer |
CERTIFICATE OF AMENDMENT
OF THE RESTATED CERTIFICATE
OF INCORPORATION OF CITIGROUP INC.
The undersigned officer of Citigroup Inc., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the “Corporation”), DOES HEREBY CERTIFY as follows:
FIRST: The name of the Corporation is Citigroup Inc.
SECOND: Upon the filing and effectiveness (the “Effective Time”) pursuant to the General Corporation Law of the State of Delaware (the “DGCL”) of this certificate of amendment to the restated certificate of incorporation of the Corporation, each ten shares of the Corporation’s common stock, par value $0.01 per share, issued and outstanding immediately prior to the Effective Time shall be combined into one (1) validly issued, fully paid and non-assessable share of common stock, par value $0.01 per share, without any further action by the Corporation or the holder thereof, subject to the treatment of fractional share interests as described below (the “Reverse Stock Split”). No certificates representing fractional shares of common stock shall be issued in connection with the Reverse Stock Split. Stockholders who otherwise would be entitled to receive fractional shares of common stock shall be entitled to receive cash (without interest and subject to applicable withholding taxes) from the Corporation’s transfer agent in lieu of such fractional share interests automatically where shares are held in book-entry form and, where shares are held in certificated form, upon the submission of a properly completed and executed transmittal letter and the surrender of the stockholder’s Old Certificates (as defined below), in an amount equal to the proceeds attributable to the sale of such fractional shares following the aggregation and sale by the Corporation’s transfer agent of all fractional shares otherwise issuable. Each certificate that immediately prior to the Effective Time represented shares of common stock (“Old Certificates”), shall thereafter represent that number of shares of common stock into which the shares of common stock represented by the Old Certificate shall have been combined, subject to the elimination of fractional share interests as described above.
THIRD: At the Effective Time, Section (A) of Article FOURTH of the Restated Certificate of Incorporation of the Corporation shall be hereby amended to read in its entirety as follows:
A. The total number of shares of all classes of stock which the Corporation shall have authority to issue is Six Billion Thirty Million (6,030,000,000). The total number of shares of Common Stock which the Corporation shall have authority to issue is Six Billion (6,000,000,000) shares of Common Stock having a par value of one cent ($.01) per share. The total number of shares of Preferred Stock which the Corporation shall have the authority to issue is Thirty Million (30,000,000) shares having a par value of one dollar ($1.00) per share.
FOURTH: The foregoing amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware.
FIFTH: The foregoing amendment shall be effective at 4:10 p.m. (Eastern Time), May 6th, 2011.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment to be signed by its duly authorized officer, this 6th day of May, 2011.
| CITIGROUP INC. | ||
|---|---|---|
| By: | /s/ Michael S. Helfer | |
| Name: | Michael S. Helfer | |
| Title: | General Counsel and Corporate Secretary |
CERTIFICATE OF DESIGNATIONS
OF
5.950% FIXED RATE / FLOATING RATE NONCUMULATIVE PREFERRED STOCK,
SERIES A
OF
CITIGROUP INC.
pursuant to Section 151 of the
General Corporation Law of the State of Delaware
Citigroup Inc., a Delaware corporation (the “Company”), hereby certifies that:
1. The Restated Certificate of Incorporation of the Company (as amended through the date hereof, the “Certificate of Incorporation”) fixes the total number of shares of all classes of capital stock that the Company shall have the authority to issue at six billion (6,000,000,000) shares of common stock, par value $0.01 per share, and thirty million (30,000,000) shares of preferred stock, par value $1.00 per share.
2. The Certificate of Incorporation expressly grants to the Board of Directors of the Company (the “Board of Directors”) authority to provide for the issuance of the shares of preferred stock in series, and to establish from time to time the number of shares to be included in each such series and to fix the designation, powers, preferences and rights of the shares of each such series and the qualifications, limitations or restrictions thereof.
3. Pursuant to the authority conferred upon a pricing committee (the “Pricing Committee”) by the Board of Directors, the Pricing Committee, by action duly taken on October 22, 2012, adopted resolutions (i) authorizing the issuance and sale of up to 60,000 shares of the Company’s preferred stock and (ii) approving this final form of Certificate of Designations of 5.950% Fixed Rate / Floating Rate Noncumulative Preferred Stock, Series A (the “Series A. Preferred Stock”) establishing the number of shares to be included in this Series A Preferred Stock and fixing the designation, powers, preferences and rights of the shares of this Series A Preferred Stock and the qualifications, limitations or restrictions thereof as follows:
Section 1. Designation.
The designation of the series of preferred stock shall be “5.950% Fixed Rate / Floating Rate Noncumulative Preferred Stock, Series A” (the “Series A Preferred Stock”). Each share of Series A Preferred Stock shall be identical in all respects to every other share of Series A Preferred Stock.
Section 2. Number of Shares.
The number of authorized shares of Series A Preferred Stock shall be 60,000. That number from time to time may be increased (but not in excess of the total number of authorized shares of preferred stock) or decreased (but not below the number of shares of Series A Preferred Stock then outstanding) by further resolution duly adopted by the Board of Directors, the Pricing Committee or any other duly authorized committee thereof and by the filing of a certificate pursuant to the provisions of the General Corporation Law of the State of Delaware stating that such increase or reduction, as the case may be, has been so authorized. The Company shall have the authority to issue fractional shares of Series A Preferred Stock.
Section 3. Definitions. As used herein with respect to Series A Preferred Stock:
“Appropriate Federal Banking Agency” means the “appropriate federal banking agency” with respect to the Company as that term is defined in Section 3(q) of the Federal Deposit Insurance Act of 1950, as amended, or any successor provision.
“Board of Directors” has the meaning set forth in the recitals above.
“Business Day” means any weekday that is not a legal holiday in New York City and is not a day on which banking institutions in New York City are authorized or required by law or regulation to be closed.
“Calculation Agent” means the Transfer Agent acting in its capacity as calculation agent for the Series A Preferred Stock, and its successors and assigns.
“Common Stock” means the common stock of the Company, par value $0.01 per share, or any other shares of the capital stock of the Company into which such shares of common stock shall be reclassified or changed.
“Depositary” means DTC or its nominee or any successor depositary appointed by the Company.
“Dividend Payment Date” shall have the meaning set forth in Section 4(a) hereof.
“Dividend Period” shall have the meaning set forth in Section 4(a) hereof.
“Dividend Record Date” shall have the meaning set forth in Section 4(a) hereof.
“DTC” means The Depository Trust Company.
“Holder” means the Person in whose name the shares of the Series A Preferred Stock are registered, which may be treated by the Company, Calculation Agent, Transfer Agent, Registrar and paying agent as the absolute owner of the shares of Series A Preferred Stock for the purpose of making payment and for all other purposes.
“Junior Stock” means the Common Stock and any other class or series of stock of the Company now existing or hereafter authorized over which Series A Preferred Stock has preference or priority in the payment of dividends or in the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the Company.
“LIBOR Determination Date” means the second London Banking Day immediately preceding the first day of the relevant Dividend Period.
“London Banking Day” means any day on which commercial banks are open for general business (including dealings in deposits in United States dollars) in London.
“Nonpayment” shall have the meaning set forth in Section 7(b)(i) hereof.
“Officer” means the Chief Executive Officer, the Chairman, the Chief Administrative Officer, any Vice Chairman, the Chief Financial Officer, the Controller, the Chief Accounting Officer, the Treasurer, any Deputy Treasurer, any Assistant Treasurer, any Vice President, the General Counsel and Corporate Secretary and any Assistant Secretary of the Company.
“Person” means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint-stock company, limited liability company, trust, or other entity.
“Preferred Stock Director” shall have the meaning set forth in Section 7(b)(i) hereof.
“Preferred Stock Director Termination Date” shall have the meaning set forth in Section 7(b)(iv) hereof.
“Registrar” means the Transfer Agent acting in its capacity as registrar for the Series A Preferred Stock, and its successors and assigns.
“Regulatory Capital Event” means the good faith determination by the Company that, as a result of (i) any amendment to, clarification of, or change in, the laws or regulations of the United States or any political subdivision of or in the United States that is enacted or becomes effective after the initial issuance of any share of the Series A Preferred Stock, (ii) any proposed change in those laws or regulations that is announced or becomes effective after the initial issuance of any share of the Series A Preferred Stock, or (iii) any official administrative decision or judicial decision or administrative action or other official pronouncement interpreting or applying those laws or regulations or policies with respect thereto that is announced after the initial issuance of any share of the Series A Preferred Stock, there is more than an insubstantial risk that the Company will not be entitled to treat the full liquidation preference amount of $25,000 per share of the Series A Preferred Stock then outstanding as “tier 1 capital” (or its equivalent) for purposes of the capital adequacy guidelines of the Federal Reserve (or, as and if applicable, the capital adequacy guidelines or regulations of any successor Appropriate Federal Banking Agency) as then in effect and applicable, for so long as any share of the Series A Preferred Stock is outstanding.
“Reuters LIBOR01” means the display designated on the Reuters 3000 Xtra Service on page LIBOR01 Page (or such other page as may replace “Reuters LIBOR01” page on the service or such other service as may be nominated by the British Bankers’ Association or other administrator of LIBOR for the purpose of displaying London interbank offered rates for United States dollar deposits or loans).
“Series A Liquidation Preference” shall have the meaning set forth in Section 5(a) hereof.
“Series A Preferred Stock” shall have the meaning set forth in Section 1 hereof.
“Series A Preferred Stock Certificate” shall have the meaning set forth in Section 14(a) hereof.
“Three-month LIBOR” means the rate (expressed as a percentage per annum) for deposits in United States dollars for a three-month period commencing on the first day of a Dividend Period that appears on the Reuters LIBOR01 page as of 11:00 a.m. (London time) on the LIBOR Determination Date for that Dividend Period. If such rate does not appear on the Reuters LIBOR01 page, Three-month LIBOR will be determined on the basis of the rates at which deposits in United States dollars for a three-month period commencing on the first day of that Dividend Period and in a principal amount of not less than $1 million are offered to prime banks in the London interbank market by four major banks in the London interbank market selected by the Calculation Agent (after consultation with the Company), at approximately 11:00 a.m., London time, on the LIBOR Determination Date for that Dividend Period. The Calculation Agent will request the principal London office of each of such banks to provide a quotation of its rate. If at least two such quotations are provided, Three-month LIBOR with respect to that Dividend Period will be the arithmetic mean (rounded upward if necessary to the nearest whole multiple of 0.00001%) of such quotations. If fewer than two quotations are provided, Three- month LIBOR with respect to that Dividend Period will be the arithmetic mean (rounded upward if necessary to the nearest whole multiple of 0.00001%) of the rates quoted by three major banks in New York City selected by the Calculation Agent (after consultation with the Company), at approximately 11:00 a.m., New York City time, on the LIBOR Determination Date for that Dividend Period for loans in United States dollars to leading European banks for a three-month period commencing on the first day of that Dividend Period and in a principal amount of not less than $1 million. However, if fewer than three banks selected by the Calculation Agent to provide quotations are quoting as described above, Three-month LIBOR for that Dividend Period will be the same Three-month LIBOR as determined for the previous Dividend Period or, in the case of the Dividend Period beginning on January 30, 2023, 0.31575%. The determination of Three-month LIBOR for each relevant Dividend Period by the Calculation Agent will (in the absence of manifest error) be final and binding.
“Transfer Agent” means Computershare Trust Company, N.A., a federally chartered national association, acting as Transfer Agent, Calculation Agent, Registrar and paying agent for the Series A Preferred Stock, and its successors and assigns.
“Trust” shall have the meaning set forth in Section 6(d).
Section 4. Dividends.
(a) Rate. Holders shall be entitled to receive, when, as and if declared by the Board of Directors or any duly authorized committee thereof, but only out of funds legally available therefor, noncumulative cash dividends on each share of Series A Preferred Stock in the amounts specified below in this Section 4, and no more, payable (i) semi-annually in arrears on each July 30 and January 30, beginning July 30, 2013, from and including the date of issuance to, but excluding, January 30, 2023, and (ii) quarterly in arrears on each January 30, April 30, July 30, and October 30, beginning April 30, 2023 from and including January 30, 2023; provided, however, if any such day is not a Business Day, then payment of any dividend otherwise payable on that date will be made on the next succeeding day that is a Business Day (except if after January 30, 2023 that day falls in the next calendar month, in which case the payment of any dividend otherwise payable will be made on the first preceding Business Day) (i) on or prior to January 30, 2023,
without any interest or other payment in respect of such postponement, and (ii) after January 30, 2023, with dividends accruing to the actual payment date (each such day on which dividends are payable a “Dividend Payment Date”). The period from and including the date of issuance of the Series A Preferred Stock or any Dividend Payment Date to, but excluding, the next Dividend Payment Date is a “Dividend Period.” Dividends on each share of Series A Preferred Stock will accrue on the liquidation preference of $25,000 per share at a rate per annum equal to (i) 5.950%, for each Dividend Period from and including the date of issuance to, but excluding, January 30, 2023 and (ii) Three-month LIBOR plus 4.068%%, for each Dividend Period from and including January 30, 2023. The record date for payment of dividends on the Series A Preferred Stock will be the record date fixed by the Board of Directors or any other duly authorized committee thereof that is not more than 30 nor less than 10 days prior to such Dividend Payment Date (each, a “Dividend Record Date”). Any such day that is a Dividend Record Date will be a Dividend Record Date whether or not such day is a Business Day. The amount of dividends payable on or prior to January 30, 2023 will be computed on the basis of a 360-day year of twelve 30-day months. The amount of dividends payable after January 30, 2023 will be computed on the basis of a 360-day year and the actual number of days elapsed.
(b) Noncumulative Dividends. If the Board of Directors or any duly authorized committee thereof does not declare a dividend on the Series A Preferred Stock for any Dividend Period prior to the related Dividend Payment Date, that dividend will not accrue, and the Company will have no obligation to pay, and Holders shall have no right to receive, a dividend for that Dividend Period on the related Dividend Payment Date or at any future time, whether or not dividends on the Series A Preferred Stock or any other series of preferred stock or common stock are declared for any subsequent period. References herein to the “accrual” of dividends refer only to the determination of the amount of such dividend and do not imply that any right to a dividend arises prior to the date on which a dividend is declared.
(c) Priority of Dividends. So long as any share of Series A Preferred Stock remains outstanding, unless as to a Dividend Payment Date full dividends on all outstanding shares of the Series A Preferred Stock have been declared and paid or declared and a sum sufficient for the payment of those dividends has been set aside for the Dividend Period then ending, the Company will not, and will cause its subsidiaries not to, during the next succeeding Dividend Period that commences on such Dividend Payment Date, declare or pay any dividend on, make any distributions relating to, or redeem, purchase, acquire or make a liquidation payment relating to, any Junior Stock, or make any guarantee payment with respect thereto, other than:
(i) purchases, redemptions or other acquisitions of shares of Junior Stock in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of employees, officers, directors or consultants;
(ii) purchases of shares of Common Stock pursuant to a contractually binding requirement to buy stock existing prior to the commencement of the then-current Dividend Period, including under a contractually binding stock repurchase plan;
(iii) as a result of an exchange or conversion of any class or series of Junior Stock for any other class or series of Junior Stock;
(iv) the purchase of fractional interests in shares of Junior Stock pursuant to the conversion or exchange provisions of such Junior Stock or the security being converted or exchanged;
(v) the purchase of Junior Stock by an investment banking subsidiary of the Company in connection with the distribution thereof; or
(vi) the purchase of Junior Stock by any investment banking subsidiary of the Company in connection with market-making or other secondary market activities in the ordinary course of the business of such subsidiary.
The restrictions set forth in the preceding provisions of this Section 4(c) shall not apply to any Junior Stock dividends paid by the Company where the dividend is in the form of the same stock (or the right to buy the same stock) as that on which the dividend is being paid.
Except as provided below, for so long as any share of Series A Preferred Stock remains outstanding, if dividends are not declared and paid in full upon the shares of Series A Preferred Stock and any class or series of stock of the Company now existing or hereafter authorized that ranks equally with the Series A Preferred Stock in the payment of dividends, all dividends declared upon shares of Series A Preferred Stock and such other stock will be declared on a proportional basis so that the amount of dividends declared per share will bear to each other the same ratio that accrued dividends for the then-current Dividend Period per share of
Series A Preferred Stock and accrued dividends for the then-current Dividend Period per share of such other stock (including, in the case of any such other stock that bears cumulative dividends, all accrued and unpaid dividends) bear to each other.
Subject to the foregoing, and not otherwise, such dividends payable in cash, stock or otherwise, as may be determined by the Board of Directors or any duly authorized committee thereof, may be declared and paid on any other class or series of stock of the Company from time to time out of any funds legally available for such payment, and Holders will not be entitled to participate in those dividends.
Section 5. Liquidation Rights.
(a) Liquidation. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company, Holders shall be entitled, out of funds legally available therefor, before any distribution or payment may be made by the Company or set aside for the holders of any Junior Stock and subject to the rights of the holders of any class or series of stock ranking senior to or on parity with Series A Preferred Stock upon liquidation and the rights of the Company’s depositors and other creditors, to receive in full a liquidating distribution in the amount of the liquidation preference of $25,000 per share, plus any accrued dividends thereon from the last Dividend Payment Date to, but excluding, the date of the liquidation, dissolution or winding up if and to the extent declared but not yet paid. Holders shall not be entitled to any further payments in the event of any such voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company other than what is expressly provided for in this Section 5.
(b) Partial Payment. If the assets of the Company are not sufficient to pay in full the aforesaid liquidation distributions to the Holders and any liquidation distributions owed to holders of any class or series of stock of the Company ranking equally with the Series A Preferred Stock in the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the Company, the amounts paid to the Holders and to the holders of all such equally ranking stock shall be pro rata in accordance with the respective aggregate liquidating distributions to which they would otherwise be entitled.
(c) Merger, Consolidation and Sale of Assets Not Liquidation. For purposes of this Section 5, the sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the property and assets of the Company shall not be deemed a voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, nor shall the merger, consolidation or any other business combination transaction of the Company into or with any other corporation or Person or the merger, consolidation or any other business combination transaction of any other corporation or Person into or with the Company be deemed to be a voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company.
Section 6. Redemption.
(a) Optional Redemption. The Company, at the option of its Board of Directors or any duly authorized committee thereof, may redeem out of funds legally available therefor, (i) in whole or in part, from time to time, the shares of Series A Preferred Stock at the time outstanding, on any Dividend Payment Date on or after January 30, 2023, or (ii) in whole but not in part at any time within 90 days following a Regulatory Capital Event, in each case at a redemption price equal to $25,000 per share plus any declared and unpaid dividends, without accumulation of any undeclared dividends, to but excluding the redemption date, upon notice given as provided in Section 6(b) below.
(b) Notice of Redemption. Notice of every redemption of shares of Series A Preferred Stock shall be mailed by first class mail, postage prepaid, addressed to the Holders of such shares to be redeemed at their respective last addresses appearing on the stock register of the Company. Such mailing shall be at least 30 days and not more than 60 days before the date fixed for redemption. Any notice mailed as provided in this Section 6(b) shall be conclusively presumed to have been duly given, whether or not the Holder receives such notice, but failure duly to give such notice by mail, or any defect in such notice or in the mailing thereof, to any Holder of shares of Series A Preferred Stock designated for redemption shall not affect the validity of the proceedings for the redemption of any other shares of Series A Preferred Stock. Each notice shall state:
(i) the redemption date;
(ii) the total number of shares of Series A Preferred Stock to be redeemed and, if fewer than all the shares of a Holder are to be redeemed, the number of such shares to be redeemed;
(iii) the redemption price;
(iv) the place or places where the certificates for such shares are to be surrendered for payment of the redemption price, if applicable; and
(v) that dividends on the shares to be redeemed will cease to accrue on the redemption date.
Notwithstanding the foregoing, if the certificates evidencing the shares of Series A Preferred Stock are held of record by a depositary and any related depository shares are held of record by a Depositary or its nominee, the Company may give such notice in any manner permitted by the Depositary.
(c) Partial Redemption. In case of any redemption of only part of the shares of Series A Preferred Stock at the time outstanding, the shares of Series A Preferred Stock to be redeemed shall be selected pro rata from the Holders in proportion to the number of shares of Series A Preferred Stock held by such Holders, by lot or in such other manner as the Board of Directors or any duly authorized committee thereof may determine, in its sole discretion, to be fair and equitable. Subject to the provisions of this Section 6, the Board of Directors or any duly authorized committee thereof shall have full power and authority to prescribe the terms and conditions upon which shares of Series A Preferred Stock shall be redeemed from time to time.
(d) Effectiveness of Redemption. If notice of redemption has been duly given and if on or before the redemption date specified in the notice all funds necessary for the redemption have been set aside by the Company, separate and apart from its other assets, for the pro rata benefit of the Holders of the shares called for redemption, so as to be and continue to be available therefor, or deposited by the Company with a bank or trust company selected by the Board of Directors or any duly authorized committee thereof (the “Trust”) in trust for the pro rata benefit of the Holders of the shares called for redemption, then, notwithstanding that any certificate for any share so called for redemption has not been surrendered for cancellation, on and after the redemption date all shares so called for redemption shall cease to be outstanding, all dividends with respect to such shares shall cease to accrue on such redemption date, and all rights with respect to such shares shall forthwith on such redemption date cease and terminate, except only the right of the Holders thereof to receive the amount payable on such redemption from the Trust at any time after the redemption date from the funds so deposited, without interest. The Company shall be entitled to receive, from time to time, from the Trust any interest accrued on such funds, and the Holders of any shares called for redemption shall have no claim to any such interest. Any funds so deposited and unclaimed at the end of three years from the redemption date shall, to the extent permitted by law, be released or repaid to the Company, and in the event of such repayment to the Company, the Holders of the shares so called for redemption shall be deemed to be unsecured creditors of the Company for an amount equivalent to the amount deposited as stated above for the redemption of such shares and so repaid to the Company, but shall in no event be entitled to any interest.
Section 7. Voting Rights.
(a) General. The Holders shall not be entitled to vote on any matter except as set forth in Section 7(b) below or as required by the Delaware General Corporation Law.
(b) Special Voting Right.
(i) Voting Right. If and whenever dividends on the Series A Preferred Stock or any other class or series of preferred stock that ranks on parity with Series A Preferred Stock as to payment of dividends and upon which voting rights equivalent to those granted by this Section 7(b)(i) have been conferred and are exercisable (any such class or series being referred to herein as “dividend parity stock”) have not been paid in an aggregate amount equal, as to any class or series, to at least three semi-annual or six quarterly Dividend Periods, as applicable, (whether consecutive or not) (a “Nonpayment”), the authorized number of directors constituting the Board of Directors shall be increased by two, and the Holders, together with holders of dividend parity stock, shall have the right, voting separately as a single class without regard to class or series (and with voting rights allocated pro rata based on the liquidation preference of each such class or series), to the exclusion of the holders of Common Stock, to elect two directors of the Company to fill such newly created directorships (and to fill any vacancies in the terms of such directorships), provided that it shall be a qualification for election of any such director that the election of such director shall not cause the Company to violate the corporate governance requirements of the New York Stock Exchange (or other exchange on which the Company’s securities may be listed) that listed companies must have a majority of independent directors and further provided that the Board of Directors shall at no time include more than two such directors. Each such director elected by the Holders together with holders of dividend parity stock is a “Preferred Stock Director.”
(ii) Election. The election of the Preferred Stock Directors will take place at any annual meeting of stockholders or any special meeting of the Holders and any dividend parity stock, called as provided herein. At any time after the special voting power has vested pursuant to Section 7(b)(i) above, the secretary of the Company may, and upon the written request (addressed to the secretary at the Company’s principal office) of the holders of at least 20% of the voting power of the Series A Preferred Stock or the holders of at least 20% of the voting power of any series of dividend parity stock (with such voting power measured based on the voting power to elect Preferred Stock Directors), must (unless such request is received less than 90 days before the date fixed for the next annual or special meeting of the stockholders at which Preferred Stock Directors are to be elected, in which event such election shall be held at such next annual or special meeting of stockholders), call a special meeting of the holders of Series A Preferred Stock and any dividend parity stock for the purposes of electing Preferred Stock Directors. The Preferred Stock Directors shall each be entitled to one vote per director on any matter.
(iii) Notice of Special Meeting. Notice for a special meeting to elect Preferred Stock Directors will be given in a similar manner to that provided in the Company’s by-laws for a special meeting of the stockholders. If the secretary of the Company does not call a special meeting within 20 days after receipt of any such request, then any Holder may (at the expense of the Company) call such meeting, upon notice as provided in this Section 7(b)(iii), and for that purpose will have access to the stock register of the Company. The Preferred Stock Directors elected at any such special meeting and each Preferred Stock Director elected at a subsequent annual or special meeting of stockholders, will be elected for term expiring upon the earlier of the Preferred Stock Director Termination Date and the next annual meeting of stockholders following such Preferred Stock Director’s election. In case any vacancy in the office of a Preferred Stock Director occurs (other than prior to the initial election of the Preferred Stock Directors), the vacancy may be filled by the Preferred Stock Director remaining in office, or if none remains in office, by a plurality of the votes cast by the holders of Series A Preferred Stock and any dividend parity stock, voting together as a single class, and the Preferred Stock Director so appointed or elected to fill such vacancy shall serve for a term expiring at the next annual meeting of the stockholders. Preferred Stock Directors may only be elected by the holders of Series A Preferred Stock and dividend parity stock in accordance with this Section 7. If the holders of Series A Preferred Stock and such dividend parity stock fail to elect a sufficient number of directors to fill all directorships for which they are entitled to elect directors pursuant to this Section 7, then any directorship not so filled shall remain vacant until such time as the holders of Series A Preferred Stock and such dividend parity stock elect a person to fill such directorship in accordance with this Section 7, or such vacancy is otherwise filled in accordance with this Section 7; and no such directorship may be filled by stockholders of the Corporation other than in accordance with this Section 7.
(iv) Termination; Removal. Whenever the Company has paid noncumulative dividends in full for at least two consecutive semi-annual or four consecutive quarterly Dividend Periods following a Nonpayment on the Series A Preferred Stock and on any dividend parity stock entitled to noncumulative dividends and has paid cumulative dividends in full on any dividend parity stock entitled to cumulative dividends, then the right of the Holders to elect the Preferred Stock Directors will cease (but subject always to the same provisions for the vesting of the special voting rights in the case of any similar non-payment of dividends in respect of future Dividend Periods) (the time of such cessation, the “Preferred Stock Director Termination Date”). Upon a Preferred Stock Director Termination Date, the terms of office of the Preferred Stock Directors will immediately terminate, the persons then serving as Preferred Stock Directors shall immediately cease to be qualified to hold office as Preferred Stock Directors, the Preferred Stock Directors shall cease to be directors of the Company and the number of directors constituting the Board of Directors shall be automatically reduced, without any action by the Board of Directors or the stockholders of the Company, by the number of Preferred Stock Directors authorized immediately prior to such termination. Any Preferred Stock Director may be removed at any time without cause by the holders of a majority of the voting power of outstanding shares of the capital stock then entitled to vote in the election of Preferred Stock Directors, voting together as a single class (with such voting power measured based on the voting power to elect Preferred Stock Directors).
(c) Senior Issuances; Adverse Changes. So long as any shares of Series A Preferred Stock are outstanding, but subject to the final paragraph of this Section 7(c), in addition to any other vote or consent of holders of the Company’s capital stock required by Delaware law, the vote or consent of the holders of at least two-thirds of the voting power of the Series A Preferred Stock and the holders of any other preferred stock entitled to vote thereon, voting together as a single class, given in person or by proxy at an annual or special meeting of stockholders, or given in writing without a meeting, will be necessary for effecting or validating any of the following actions, whether or not such approval is required by Delaware law:
(i) any amendment, alteration or repeal of any provision of the Company’s certificate of incorporation (including the certificate of designations creating the Series A Preferred Stock) or the Company’s by-laws that would alter or change the voting powers, preferences, economic rights or special rights of the Series A Preferred Stock so as to affect them adversely;
(ii) any amendment or alteration of the Company’s certificate of incorporation to authorize or create, or increase the authorized amount of, any shares of, or any securities convertible into shares of, any class or series of the Company’s capital stock ranking prior to the Series A Preferred Stock in the payment of dividends or in the distribution of assets on any liquidation, dissolution, or winding up of the Company; or
(iii) the consummation of a binding share exchange or reclassification involving the Series A Preferred Stock or a merger or consolidation of the Company with another entity, except that holders of Series A Preferred Stock will have no right to vote under this provision or otherwise under Delaware law if in each case (i) the Series A Preferred Stock remains outstanding or, in the case of any such merger or consolidation with respect to which the Company is not the surviving or resulting entity, is converted into or exchanged for preferred securities of the surviving or resulting entity or its ultimate parent, that is an entity organized and existing under the laws of the United States of America, any state thereof or the District of Columbia and that is a corporation for U.S. federal income tax purposes (or if such entity is not a corporation, the Company having received an opinion of nationally recognized counsel experienced in such matters to the effect that Holders will be subject to tax for U.S. federal income tax purposes with respect to such new preferred securities after such merger or consolidation in the same amount, at the same time and otherwise in the same manner as would have been the case under the Series A Preferred Stock prior to such merger or consolidation), and (ii) such Series A Preferred Stock remaining outstanding or such preferred securities, as the case may be, have such rights, preferences, privileges and voting powers, taken as a whole, as are not materially less favorable to the holders thereof than the rights, preferences, privileges and voting powers of the Series A Preferred Stock, taken as a whole;
provided, however, that, for the avoidance of doubt, any increase in the amount of the authorized or issued Series A Preferred Stock or authorized preferred stock or any securities convertible into preferred stock or the creation and issuance, or an increase in the authorized or issued amount, of other series of preferred stock or any securities convertible into preferred stock ranking equally with and/or junior to the Series A Preferred Stock with respect to the payment of dividends (whether such dividends are cumulative or noncumulative) and/or the distribution of assets upon the Company’s liquidation, dissolution or winding up will not be deemed to adversely affect the voting powers, preferences or special rights of the Series A Preferred Stock, and no stockholder will have the right to vote on such an increase, creation or issuance by reason of this Section 7.
If any amendment, alteration, repeal, share exchange, reclassification, merger or consolidation specified in this Section 7(c) would adversely affect the Series A Preferred Stock but not all series of preferred stock of the Company, then only such series of preferred stock as are adversely affected by and entitled to vote on the matter shall vote on the matter together with the Series A Preferred Stock as a single class (in lieu of all other series of preferred stock) for purposes of the vote or consent required by this Section 7(c).
(d) No Vote if Redemption. No vote or consent of the Holders shall be required pursuant to Section 7(b) or 7(c) if, at or prior to the time when the act with respect to such vote or consent would otherwise be required shall be effected, the Company shall have redeemed or shall have called for redemption all outstanding shares of Series A Preferred Stock, with proper notice and sufficient funds having been set aside for such redemption, in each case pursuant to Section 6 above.
Section 8. Preemption and Conversion Rights.
The Holders shall not have any preemptive rights or conversion rights as a result of the terms hereof.
Section 9. Rank.
For the avoidance of doubt, the Board of Directors or any duly authorized committee thereof may, without the vote of the Holders, authorize and issue additional shares of Junior Stock or shares of any class or series of stock of the Company now existing or hereafter authorized that ranks equally with the Series A Preferred Stock in the payment of dividends or in the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the Company.
Section 10. Reacquired Shares.
The Board of Directors shall take such actions as are necessary to cause the shares of Series A Preferred Stock which have been redeemed or otherwise purchased or acquired by the Company to be retired and restored to the status of authorized but unissued shares of preferred stock without designation as to series.
Section 11. No Sinking Fund.
Shares of Series A Preferred Stock are not subject to the operation of a sinking fund.
Section 12. Transfer Agent, Calculation Agent, Registrar and Paying Agent.
The duly appointed Transfer Agent, Calculation Agent, Registrar and paying agent for the Series A Preferred Stock shall be Computershare Trust Company, N.A. The Company may, in its sole discretion, remove the Transfer Agent in accordance with the agreement between the Company and the Transfer Agent; provided, however, that the Company shall appoint a successor transfer agent who shall accept such appointment prior to the effectiveness of such removal. Upon any such removal or appointment, the Company shall send notice thereof by first-class mail, postage prepaid, to the Holders.
Section 13. Replacement Certificates for Mutilated, Destroyed, Stolen and Lost Certificates.
If physical certificates are issued, the Company shall replace any mutilated certificate at the Holder’s expense upon surrender of that certificate to the Transfer Agent. The Company shall replace certificates that become destroyed, stolen or lost at the Holder’s expense upon delivery to the Company and the Transfer Agent of satisfactory evidence that the certificate has been destroyed, stolen or lost, together with any indemnity that may be required by the Transfer Agent and the Company.
Section 14. Form.
(a) Series A Preferred Stock Certificates. Series A Preferred Stock shall be issued in certificated form in substantially the form attached hereto as Exhibit A (each, a “Series A Preferred Stock Certificate”). Exhibit A is hereby incorporated in and expressly made a part of this Certificate of Designations. The Series A Preferred Stock Certificates may have notations, legends or endorsements required by law, stock exchange rules, agreements to which the Company is subject, if any, or usage (provided that any such notation, legend or endorsement is in a form acceptable to the Company).
(b)Signature. Two Officers shall sign any Series A Preferred Stock Certificate for the Company, in accordance with the Company’s by-laws and applicable law, by manual or facsimile signature. If an Officer whose signature is on a Series A Preferred Stock Certificate no longer holds that office at the time the Transfer Agent countersigned the Series A Preferred Stock Certificate, such Series A Preferred Stock Certificate shall be valid nevertheless. A Series A Preferred Stock Certificate shall not be valid until an authorized signatory of the Transfer Agent manually countersigns such Series A Preferred Stock Certificate. Each Series A Preferred Stock Certificate shall be dated the date of its countersignature.
Section 15. Taxes.
(a) Transfer Taxes. The Company shall pay any and all stock transfer, documentary, stamp and similar taxes that may be payable in respect of any issuance or delivery of shares of Series A Preferred Stock. The Company shall not, however, be required to pay any such tax that may be payable in respect of any transfer involved in the issuance or delivery of shares of Series A Preferred Stock, in a name other than that in which the shares of Series A Preferred Stock were registered, or in respect of any payment to any Person other than a payment to the registered holder thereof, and shall not be required to make any such issuance, delivery or payment unless and until the Person otherwise entitled to such issuance, delivery or payment has paid to the Company the amount of any such tax or has established, to the satisfaction of the Company, that such tax has been paid or is not payable.
(b) Withholding. All payments and distributions (or deemed distributions) on the shares of Series A Preferred Stock shall be subject to withholding and backup withholding of tax to the extent required by law, subject to applicable exemptions, and amounts withheld, if any, shall be treated as received by Holders.
Section 16. Notices.
All notices referred to herein shall be in writing, and, unless otherwise specified herein, all notices hereunder shall be deemed to have been given upon the earlier of receipt thereof or three Business Days after the mailing thereof if sent by registered or certified mail (unless first class mail shall be specifically permitted for such notice under the terms of this Certificate of Designations) with postage prepaid, addressed: (i) if to the Company, to its office at 399 Park Avenue, New York, New York 10043 (Attention: Corporate
Secretary) or to the Transfer Agent at its office at 250 Royall Street, Canton, Massachusetts 02021, or other agent of the Company designated as permitted by this Certificate of Designations, or (ii) if to any Holder, to such Holder at the address of such Holder as listed in the stock record books of the Company (which may include the records of the Transfer Agent) or (iii) to such other address as the Company or any such Holder, as the case may be, shall have designated by notice similarly given.
Section 17. Other Rights Disclaimed.
The shares of Series A Preferred Stock have no voting powers, preferences or relative, participating, optional or other special rights, or qualifications, limitations or restrictions thereof, other than as set forth herein or in the Certificate of Incorporation of the Company.
IN WITNESS WHEREOF, this Certificate of Designations as has been executed on behalf of the Company by its Chief Accounting Officer this 26th day of October, 2012.
| CITIGROUP INC. | ||
|---|---|---|
| By: | /s/Jeffrey R. Walsh | |
| Name: | Jeffrey R. Walsh | |
| Title: | Chief Accounting Officer |
FORM OF
% FIXED RATE / FLOATING RATE NONCUMULATIVE PREFERRED STOCK, SERIES A
| Certificate Number | Number of Shares of Series A Preferred Stock | |
|---|---|---|
| CUSIP NO.: |
CITIGROUP INC.
% Fixed Rate / Floating Rate Noncumulative Preferred Stock, Series A
(par value $1.00 per share)
(liquidation preference $25,000 per share)
Citigroup Inc., a Delaware corporation (the “Company”), hereby certifies that [ ] (the “Holder”) is the registered owner of [ ] fully paid and non-assessable shares of the Company’s designated % Fixed Rate / Floating Rate Noncumulative Preferred Stock, Series A, with a par value of $1.00 per share and a liquidation preference of $25,000 per share (the “Series A Preferred Stock”). The shares of Series A Preferred Stock are transferable on the books and records of the Registrar, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer. The designations, rights, privileges, restrictions, preferences and other terms and provisions of the Series A Preferred Stock represented hereby are and shall in all respects be subject to the provisions of the Certificate of Designations dated October [ ], 2012 as the same may be amended from time to time (the “Certificate of Designations”). Capitalized terms used herein but not defined shall have the meaning given them in the Certificate of Designations. The Company will provide a copy of the Certificate of Designations to a Holder without charge upon written request to the Company at its principal place of business.
Reference is hereby made to select provisions of the Series A Preferred Stock set forth on the reverse hereof, and to the Certificate of Designations, which select provisions and the Certificate of Designations shall for all purposes have the same effect as if set forth at this place.
Upon receipt of this certificate, the Holder is bound by the Certificate of Designations and is entitled to the benefits thereunder.
Unless the Registrar has properly countersigned, these shares of Series A Preferred Stock shall not be entitled to any benefit under the Certificate of Designations or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, this certificate has been executed on behalf of the Company by its [Title] and by its [Title] this day of , .
| CITIGROUP INC. |
|---|
| By: |
| Name: |
| Title: |
| By: |
| Name: |
| Title: |
REGISTRAR’S COUNTERSIGNATURE
These are shares of Series A Preferred Stock referred to in the within-mentioned Certificate of Designations.
Dated:
| COMPUTERSHARE TRUST COMPANY, N.A., as Registrar |
|---|
| By: |
| Name: |
| Title: |
REVERSE OF CERTIFICATE
Dividends on each share of Series A Preferred Stock shall be payable at the rate provided in the Certificate of Designations.
The shares of Series A Preferred Stock shall be redeemable at the option of the Company in the manner and in accordance with the terms set forth in the Certificate of Designations.
The Company shall furnish without charge to each holder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class or series of share capital issued by the Company and the qualifications, limitations or restrictions of such preferences and/or rights.
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers the shares of Series A Preferred Stock evidenced hereby to:
(Insert assignee’s social security or taxpayer identification number, if any)
(Insert address and zip code of assignee)
and irrevocably appoints:
as agent to transfer the shares of Series A Preferred Stock evidenced hereby on the books of the Transfer Agent. The agent may substitute another to act for him or her.
Date:
Signature:
| (Sign exactly as your name appears on the other side of this Certificate) |
|---|
| Signature Guarantee: |
| --- |
(Signature must be guaranteed by an “eligible guarantor institution” that is a bank, stockbroker, savings and loan association or credit union meeting the requirements of the Transfer Agent, which requirements include membership or participation in the Securities Transfer Agents Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Transfer Agent in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.)
CERTIFICATE OF DESIGNATIONS
OF
5.90% FIXED RATE / FLOATING RATE NONCUMULATIVE PREFERRED STOCK,
SERIES B
OF
CITIGROUP INC.
______________________________
pursuant to Section 151 of the
General Corporation Law of the State of Delaware
______________________________
Citigroup Inc., a Delaware corporation (the “Company”), hereby certifies that:
1. The Restated Certificate of Incorporation of the Company (as amended through the date hereof, the “Certificate of Incorporation”) fixes the total number of shares of all classes of capital stock that the Company shall have the authority to issue at six billion (6,000,000,000) shares of common stock, par value $0.01 per share, and thirty million (30,000,000) shares of preferred stock, par value $1.00 per share.
2. The Certificate of Incorporation expressly grants to the Board of Directors of the Company (the “Board of Directors”) authority to provide for the issuance of the shares of preferred stock in series, and to establish from time to time the number of shares to be included in each such series and to fix the designation, powers, preferences and rights of the shares of each such series and the qualifications, limitations or restrictions thereof.
3. Pursuant to the authority conferred upon a pricing committee (the “Pricing Committee”) by the Board of Directors, the Pricing Committee, by action duly taken on December 6, 2012, adopted resolutions (i) authorizing the issuance and sale of up to 30,000 shares of the Company’s preferred stock and (ii) approving this final form of Certificate of Designations of 5.90% Fixed Rate / Floating Rate Noncumulative Preferred Stock, Series B (the “Series B Preferred Stock”) establishing the number of shares to be included in this Series B Preferred Stock and fixing the designation, powers, preferences and rights of the shares of this Series B Preferred Stock and the qualifications, limitations or restrictions thereof as follows:
Section 1. Designation.
The designation of the series of preferred stock shall be “5.90% Fixed Rate / Floating Rate Noncumulative Preferred Stock, Series B” (the “Series B Preferred Stock”). Each share of Series B Preferred Stock shall be identical in all respects to every other share of Series B Preferred Stock.
Section 2. Number of Shares.
The number of authorized shares of Series B Preferred Stock shall be 30,000. That number from time to time may be increased (but not in excess of the total number of authorized shares of preferred stock) or decreased (but not below the number of shares of Series B Preferred Stock then outstanding) by further resolution duly adopted by the Board of Directors, the Pricing Committee or any other duly authorized committee thereof and by the filing of a certificate pursuant to the provisions of the General Corporation Law of the State of Delaware stating that such increase or reduction, as the case may be, has been so authorized. The Company shall have the authority to issue fractional shares of Series B Preferred Stock.
Section 3. Definitions. As used herein with respect to Series B Preferred Stock:
“Appropriate Federal Banking Agency” means the “appropriate federal banking agency” with respect to the Company as that term is defined in Section 3(q) of the Federal Deposit Insurance Act of 1950, as amended, or any successor provision.
“Board of Directors” has the meaning set forth in the recitals above.
“Business Day” means any weekday that is not a legal holiday in New York City and is not a day on which banking institutions in New York City are authorized or required by law or regulation to be closed.
“Calculation Agent” means the Transfer Agent acting in its capacity as calculation agent for the Series B Preferred Stock, and its successors and assigns.
“Common Stock” means the common stock of the Company, par value $0.01 per share, or any other shares of the capital stock of the Company into which such shares of common stock shall be reclassified or changed.
“Depositary” means DTC or its nominee or any successor depositary appointed by the Company.
“Dividend Payment Date” shall have the meaning set forth in Section 4(a) hereof.
“Dividend Period” shall have the meaning set forth in Section 4(a) hereof.
“Dividend Record Date” shall have the meaning set forth in Section 4(a) hereof.
“DTC” means The Depository Trust Company.
“Holder” means the Person in whose name the shares of the Series B Preferred Stock are registered, which may be treated by the Company, Calculation Agent, Transfer Agent, Registrar and paying agent as the absolute owner of the shares of Series B Preferred Stock for the purpose of making payment and for all other purposes.
“Junior Stock” means the Common Stock and any other class or series of stock of the Company now existing or hereafter authorized over which Series B Preferred Stock has preference or priority in the payment of dividends or in the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the Company.
“LIBOR Determination Date” means the second London Banking Day immediately preceding the first day of the relevant Dividend Period.
“London Banking Day” means any day on which commercial banks are open for general business (including dealings in deposits in United States dollars) in London.
“Nonpayment” shall have the meaning set forth in Section 7(b)(i) hereof.
“Officer” means the Chief Executive Officer, the Chairman, the Chief Administrative Officer, any Vice Chairman, the Chief Financial Officer, the Controller, the Chief Accounting Officer, the Treasurer, any Deputy Treasurer, any Assistant Treasurer, any Vice President, the General Counsel and Corporate Secretary and any Assistant Secretary of the Company.
“Person” means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint-stock company, limited liability company, trust, or other entity.
“Preferred Stock Director” shall have the meaning set forth in Section 7(b)(i) hereof.
“Preferred Stock Director Termination Date” shall have the meaning set forth in Section 7(b)(iv) hereof.
“Registrar” means the Transfer Agent acting in its capacity as registrar for the Series B Preferred Stock, and its successors and assigns.
“Regulatory Capital Event” means the good faith determination by the Company that, as a result of (i) any amendment to, clarification of, or change in, the laws or regulations of the United States or any political subdivision of or in the United States that is enacted or becomes effective after the initial issuance of any share of the Series B Preferred Stock, (ii) any proposed change in those laws or regulations that is announced or becomes effective after the initial issuance of any share of the Series B Preferred Stock, or (iii) any official administrative decision or judicial decision or administrative action or other official pronouncement interpreting or applying those laws or regulations or policies with respect thereto that is announced after the initial issuance of any share of the Series B Preferred Stock, there is more than an insubstantial risk that the Company will not be entitled to treat the full liquidation preference amount of $25,000 per share of the Series B Preferred Stock then outstanding as “tier 1 capital” (or its equivalent) for purposes of the capital adequacy guidelines of the Federal Reserve (or, as and if applicable, the capital adequacy guidelines or regulations of any successor Appropriate Federal Banking Agency) as then in effect and applicable, for so long as any share of the Series B Preferred Stock is outstanding.
“Reuters LIBOR01” means the display designated on the Reuters 3000 Xtra Service on page LIBOR01 Page (or such other page as may replace “Reuters LIBOR01” page on the service or such other service as may be nominated by the British Bankers’ Association or other administrator of LIBOR for the purpose of displaying London interbank offered rates for United States dollar deposits or loans).
"Series B Liquidation Preference" shall have the meaning set forth in Section 5(a) hereof.
“Series B Preferred Stock” shall have the meaning set forth in Section 1 hereof.
“Series B Preferred Stock Certificate” shall have the meaning set forth in Section 14(a) hereof.
“Three-month LIBOR” means the rate (expressed as a percentage per annum) for deposits in United States dollars for a three-month period commencing on the first day of a Dividend Period that appears on the Reuters LIBOR01 page as of 11:00 a.m. (London time) on the LIBOR Determination Date for that Dividend Period. If such rate does not appear on the Reuters LIBOR01 page, Three-month LIBOR will be determined on the basis of the rates at which deposits in United States dollars for a three-month period commencing on the first day of that Dividend Period and in a principal amount of not less than $1 million are offered to prime banks in the London interbank market by four major banks in the London interbank market selected by the Calculation Agent (after consultation with the Company), at approximately 11:00 a.m., London time, on the LIBOR Determination Date for that Dividend Period. The Calculation Agent will request the principal London office of each of such banks to provide a quotation of its rate. If at least two such quotations are provided, Three-month LIBOR with respect to that Dividend Period will be the arithmetic mean (rounded upward if necessary to the nearest whole multiple of 0.00001%) of such quotations. If fewer than two quotations are provided, Three-month LIBOR with respect to that Dividend Period will be the arithmetic mean (rounded upward if necessary to the nearest whole multiple of 0.00001%) of the rates quoted by three major banks in New York City selected by the Calculation Agent (after consultation with the Company), at approximately 11:00 a.m., New York City time, on the LIBOR Determination Date for that Dividend Period for loans in United States dollars to leading European banks for a three-month period commencing on the first day of that Dividend Period and in a principal amount of not less than $1 million. However, if fewer than three banks selected by the Calculation Agent to provide quotations are quoting as described above, Three-month LIBOR for that Dividend Period will be the same Three-month LIBOR as determined for the previous Dividend Period or, in the case of the Dividend Period beginning on February 15, 2023, 0.3095%. The determination of Three-month LIBOR for each relevant Dividend Period by the Calculation Agent will (in the absence of manifest error) be final and binding.
“Transfer Agent” means Computershare Trust Company, N.A., a federally chartered national association, acting as Transfer Agent, Calculation Agent, Registrar and paying agent for the Series B Preferred Stock, and its successors and assigns.
“Trust” shall have the meaning set forth in Section 6(d).
Section 4. Dividends.
(a) Rate. Holders shall be entitled to receive, when, as and if declared by the Board of Directors or any duly authorized committee thereof, but only out of funds legally available therefor, noncumulative cash dividends on each share of Series B Preferred Stock in the amounts specified below in this Section 4, and no more, payable (i) semi-annually in arrears on each August 15 and February 15, beginning August 15, 2013, from and including the date of issuance to, but excluding, February 15, 2023, and (ii) quarterly in arrears on each February 15, May 15, August 15, and November 15, beginning May 15, 2023 from and including February 15, 2023; provided, however, if any such day is not a Business Day, then payment of any dividend otherwise payable on that date will be made on the next succeeding day that is a Business Day (except if after February 15, 2023 that day falls in the next calendar month, in which case the payment of any dividend otherwise payable will be made on the first preceding Business Day) (i) on or prior to February 15, 2023, without any interest or other payment in respect of such postponement, and (ii) after February 15, 2023, with dividends accruing to the actual payment date (each such day on which dividends are payable a “Dividend Payment Date”). The period from and including the date of issuance of the Series B Preferred Stock or any Dividend Payment Date to, but excluding, the next Dividend Payment Date is a “Dividend Period.” Dividends on each share of Series B Preferred Stock will accrue on the liquidation preference of $25,000 per share at a rate per annum equal to (i) 5.90%, for each Dividend Period from and including the date of issuance to, but excluding, February 15, 2023 and (ii) Three-month LIBOR plus 4.23%, for each Dividend Period from and including February 15, 2023. The record date for payment of dividends on the Series B Preferred Stock will be the record date fixed by the Board of Directors or any other duly authorized committee thereof that is not more than 30 nor less than 10 days prior to such Dividend Payment Date (each, a “Dividend Record Date”). Any such day that is a Dividend Record Date will be a Dividend Record Date whether or not such day is a Business Day. The amount of dividends payable on or prior to February 15, 2023 will be computed on the basis of a 360-day year of twelve 30-day months. The amount of dividends payable after February 15, 2023 will be computed on the basis of a 360-day year and the actual number of days elapsed.
(b) Noncumulative Dividends. If the Board of Directors or any duly authorized committee thereof does not declare a dividend on the Series B Preferred Stock for any Dividend Period prior to the related Dividend Payment Date, that dividend will not accrue, and the Company will have no obligation to pay, and Holders shall have no right to receive, a dividend for that Dividend Period on the related Dividend Payment Date or at any future time, whether or not dividends on the Series B Preferred Stock or any other series of preferred stock or common stock are declared for any subsequent
period. References herein to the “accrual” of dividends refer only to the determination of the amount of such dividend and do not imply that any right to a dividend arises prior to the date on which a dividend is declared.
(c) Priority of Dividends. So long as any share of Series B Preferred Stock remains outstanding, unless as to a Dividend Payment Date full dividends on all outstanding shares of the Series B Preferred Stock have been declared and paid or declared and a sum sufficient for the payment of those dividends has been set aside for the Dividend Period then ending, the Company will not, and will cause its subsidiaries not to, during the next succeeding Dividend Period that commences on such Dividend Payment Date, declare or pay any dividend on, make any distributions relating to, or redeem, purchase, acquire or make a liquidation payment relating to, any Junior Stock, or make any guarantee payment with respect thereto, other than:
(i) purchases, redemptions or other acquisitions of shares of Junior Stock in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of employees, officers, directors or consultants;
(ii) purchases of shares of Common Stock pursuant to a contractually binding requirement to buy stock existing prior to the commencement of the then-current Dividend Period, including under a contractually binding stock repurchase plan;
(iii) as a result of an exchange or conversion of any class or series of Junior Stock for any other class or series of Junior Stock;
(iv) the purchase of fractional interests in shares of Junior Stock pursuant to the conversion or exchange provisions of such Junior Stock or the security being converted or exchanged;
(v) the purchase of Junior Stock by an investment banking subsidiary of the Company in connection with the distribution thereof; or
(vi) the purchase of Junior Stock by any investment banking subsidiary of the Company in connection with market-making or other secondary market activities in the ordinary course of the business of such subsidiary.
The restrictions set forth in the preceding provisions of this Section 4(c) shall not apply to any Junior Stock dividends paid by the Company where the dividend is in the form of the same stock (or the right to buy the same stock) as that on which the dividend is being paid.
Except as provided below, for so long as any share of Series B Preferred Stock remains outstanding, if dividends are not declared and paid in full upon the shares of Series B Preferred Stock and any class or series of stock of the Company now existing or hereafter authorized that ranks equally with the Series B Preferred Stock in the payment of dividends, all dividends declared upon shares of Series B Preferred Stock and such other stock will be declared on a proportional basis so that the amount of dividends declared per share will bear to each other the same ratio that accrued dividends for the then-current Dividend Period per share of Series B Preferred Stock and accrued dividends for the then-current Dividend Period per share of such other stock (including, in the case of any such other stock that bears cumulative dividends, all accrued and unpaid dividends) bear to each other.
Subject to the foregoing, and not otherwise, such dividends payable in cash, stock or otherwise, as may be determined by the Board of Directors or any duly authorized committee thereof, may be declared and paid on any other class or series of stock of the Company from time to time out of any funds legally available for such payment, and Holders will not be entitled to participate in those dividends.
Section 5. Liquidation Rights.
(a) Liquidation. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company, Holders shall be entitled, out of funds legally available therefor, before any distribution or payment may be made by the Company or set aside for the holders of any Junior Stock and subject to the rights of the holders of any class or series of stock ranking senior to or on parity with Series B Preferred Stock upon liquidation and the rights of the Company’s depositors and other creditors, to receive in full a liquidating distribution in the amount of the liquidation preference of $25,000 per share, plus any accrued dividends thereon from the last Dividend Payment Date to, but excluding, the date of the liquidation, dissolution or winding up if and to the extent declared but not yet paid. Holders shall not be entitled to any further payments in the event of any such voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company other than what is expressly provided for in this Section 5.
(b) Partial Payment. If the assets of the Company are not sufficient to pay in full the aforesaid liquidation distributions to the Holders and any liquidation distributions owed to holders of any class or series of stock of the Company ranking equally with the Series B Preferred Stock in the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the Company, the amounts paid to the Holders and to the holders of all such equally ranking stock shall be pro rata in accordance with the respective aggregate liquidating distributions to which they would otherwise be entitled.
(c) Merger, Consolidation and Sale of Assets Not Liquidation. For purposes of this Section 5, the sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the property and assets of the Company shall not be deemed a voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, nor shall the merger, consolidation or any other business combination transaction of the Company into or with any other corporation or Person or the merger, consolidation or any other business combination transaction of any other corporation or Person into or with the Company be deemed to be a voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company.
Section 6. Redemption.
(a) Optional Redemption. The Company, at the option of its Board of Directors or any duly authorized committee thereof, may redeem out of funds legally available therefor, (i) in whole or in part, from time to time, the shares of Series B Preferred Stock at the time outstanding, on any Dividend Payment Date on or after February 15, 2023, or (ii) in whole but not in part at any time within 90 days following a Regulatory Capital Event, in each case at a redemption price equal to $25,000 per share plus any declared and unpaid dividends, without accumulation of any undeclared dividends, to but excluding the redemption date, upon notice given as provided in Section 6(b) below.
(b) Notice of Redemption. Notice of every redemption of shares of Series B Preferred Stock shall be mailed by first class mail, postage prepaid, addressed to the Holders of such shares to be redeemed at their respective last addresses appearing on the stock register of the Company. Such mailing shall be at least 30 days and not more than 60 days before the date fixed for redemption. Any notice mailed as provided in this Section 6(b) shall be conclusively presumed to have been duly given, whether or not the Holder receives such notice, but failure duly to give such notice by mail, or any defect in such notice or in the mailing thereof, to any Holder of shares of Series B Preferred Stock designated for redemption shall not affect the validity of the proceedings for the redemption of any other shares of Series B Preferred Stock. Each notice shall state:
(i) the redemption date;
(ii) the total number of shares of Series B Preferred Stock to be redeemed and, if fewer than all the shares of a Holder are to be redeemed, the number of such shares to be redeemed;
(iii) the redemption price;
(iv) the place or places where the certificates for such shares are to be surrendered for payment of the redemption price, if applicable; and
(v) that dividends on the shares to be redeemed will cease to accrue on the redemption date.
Notwithstanding the foregoing, if the certificates evidencing the shares of Series B Preferred Stock are held of record by a depositary and any related depository shares are held of record by a Depositary or its nominee, the Company may give such notice in any manner permitted by the Depositary.
(c) Partial Redemption. In case of any redemption of only part of the shares of Series A Preferred Stock at the time outstanding, the shares of Series B Preferred Stock to be redeemed shall be selected pro rata from the Holders in proportion to the number of shares of Series B Preferred Stock held by such Holders, by lot or in such other manner as the Board of Directors or any duly authorized committee thereof may determine, in its sole discretion, to be fair and equitable. Subject to the provisions of this Section 6, the Board of Directors or any duly authorized committee thereof shall have full power and authority to prescribe the terms and conditions upon which shares of Series B Preferred Stock shall be redeemed from time to time.
(d) Effectiveness of Redemption. If notice of redemption has been duly given and if on or before the redemption date specified in the notice all funds necessary for the redemption have been set aside by the Company, separate and apart from its other assets, for the pro rata benefit of the Holders of the shares called for redemption, so as to be and continue
to be available therefor, or deposited by the Company with a bank or trust company selected by the Board of Directors or any duly authorized committee thereof (the “Trust”) in trust for the pro rata benefit of the Holders of the shares called for redemption, then, notwithstanding that any certificate for any share so called for redemption has not been surrendered for cancellation, on and after the redemption date all shares so called for redemption shall cease to be outstanding, all dividends with respect to such shares shall cease to accrue on such redemption date, and all rights with respect to such shares shall forthwith on such redemption date cease and terminate, except only the right of the Holders thereof to receive the amount payable on such redemption from the Trust at any time after the redemption date from the funds so deposited, without interest. The Company shall be entitled to receive, from time to time, from the Trust any interest accrued on such funds, and the Holders of any shares called for redemption shall have no claim to any such interest. Any funds so deposited and unclaimed at the end of three years from the redemption date shall, to the extent permitted by law, be released or repaid to the Company, and in the event of such repayment to the Company, the Holders of the shares so called for redemption shall be deemed to be unsecured creditors of the Company for an amount equivalent to the amount deposited as stated above for the redemption of such shares and so repaid to the Company, but shall in no event be entitled to any interest.
Section 7. Voting Rights.
(a) General. The Holders shall not be entitled to vote on any matter except as set forth in Section 7(b) below or as required by the Delaware General Corporation Law.
(b) Special Voting Right.
(i) Voting Right. If and whenever dividends on the Series B Preferred Stock or any other class or series of preferred stock that ranks on parity with Series B Preferred Stock as to payment of dividends and upon which voting rights equivalent to those granted by this Section 7(b)(i) have been conferred and are exercisable (any such class or series being referred to herein as “dividend parity stock”) have not been paid in an aggregate amount equal, as to any class or series, to at least three semi-annual or six quarterly Dividend Periods, as applicable, (whether consecutive or not) (a “Nonpayment”), the authorized number of directors constituting the Board of Directors shall be increased by two, and the Holders, together with holders of dividend parity stock, shall have the right, voting separately as a single class without regard to class or series (and with voting rights allocated pro rata based on the liquidation preference of each such class or series), to the exclusion of the holders of Common Stock, to elect two directors of the Company to fill such newly created directorships (and to fill any vacancies in the terms of such directorships), provided that it shall be a qualification for election of any such director that the election of such director shall not cause the Company to violate the corporate governance requirements of the New York Stock Exchange (or other exchange on which the Company’s securities may be listed) that listed companies must have a majority of independent directors and further provided that the Board of Directors shall at no time include more than two such directors. Each such director elected by the Holders together with holders of dividend parity stock is a “Preferred Stock Director.”
(ii) Election. The election of the Preferred Stock Directors will take place at any annual meeting of stockholders or any special meeting of the Holders and any dividend parity stock, called as provided herein. At any time after the special voting power has vested pursuant to Section 7(b)(i) above, the secretary of the Company may, and upon the written request (addressed to the secretary at the Company’s principal office) of the holders of at least 20% of the voting power of the Series B Preferred Stock or the holders of at least 20% of the voting power of any series of dividend parity stock (with such voting power measured based on the voting power to elect Preferred Stock Directors), must (unless such request is received less than 90 days before the date fixed for the next annual or special meeting of the stockholders at which Preferred Stock Directors are to be elected, in which event such election shall be held at such next annual or special meeting of stockholders), call a special meeting of the holders of Series B Preferred Stock and any dividend parity stock for the purposes of electing Preferred Stock Directors. The Preferred Stock Directors shall each be entitled to one vote per director on any matter.
(iii) Notice of Special Meeting. Notice for a special meeting to elect Preferred Stock Directors will be given in a similar manner to that provided in the Company’s by-laws for a special meeting of the stockholders. If the secretary of the Company does not call a special meeting within 20 days after receipt of any such request, then any Holder may (at the expense of the Company) call such meeting, upon notice as provided in this Section 7(b)(iii), and for that purpose will have access to the stock register of the Company. The Preferred Stock Directors elected at any such special meeting and each Preferred Stock Director elected at a subsequent annual or special meeting of stockholders, will be elected for term expiring upon the earlier of the Preferred Stock
Director Termination Date and the next annual meeting of stockholders following such Preferred Stock Director's election. In case any vacancy in the office of a Preferred Stock Director occurs (other than prior to the initial election of the Preferred Stock Directors), the vacancy may be filled by the Preferred Stock Director remaining in office, or if none remains in office, by a plurality of the votes cast by the holders of Series B Preferred Stock and any dividend parity stock, voting together as a single class, and the Preferred Stock Director so appointed or elected to fill such vacancy shall serve for a term expiring at the next annual meeting of the stockholders. Preferred Stock Directors may only be elected by the holders of Series B Preferred Stock and dividend parity stock in accordance with this Section 7. If the holders of Series B Preferred Stock and such dividend parity stock fail to elect a sufficient number of directors to fill all directorships for which they are entitled to elect directors pursuant to this Section 7, then any directorship not so filled shall remain vacant until such time as the holders of Series B Preferred Stock and such dividend parity stock elect a person to fill such directorship in accordance with this Section 7, or such vacancy is otherwise filled in accordance with this Section 7; and no such directorship may be filled by stockholders of the Corporation other than in accordance with this Section 7.
(iv) Termination; Removal. Whenever the Company has paid noncumulative dividends in full for at least two consecutive semi-annual or four consecutive quarterly Dividend Periods following a Nonpayment on the Series B Preferred Stock and on any dividend parity stock entitled to noncumulative dividends and has paid cumulative dividends in full on any dividend parity stock entitled to cumulative dividends, then the right of the Holders to elect the Preferred Stock Directors will cease (but subject always to the same provisions for the vesting of the special voting rights in the case of any similar non-payment of dividends in respect of future Dividend Periods) (the time of such cessation, the “Preferred Stock Director Termination Date”). Upon a Preferred Stock Director Termination Date, the terms of office of the Preferred Stock Directors will immediately terminate, the persons then serving as Preferred Stock Directors shall immediately cease to be qualified to hold office as Preferred Stock Directors, the Preferred Stock Directors shall cease to be directors of the Company and the number of directors constituting the Board of Directors shall be automatically reduced, without any action by the Board of Directors or the stockholders of the Company, by the number of Preferred Stock Directors authorized immediately prior to such termination. Any Preferred Stock Director may be removed at any time without cause by the holders of a majority of the voting power of outstanding shares of the capital stock then entitled to vote in the election of Preferred Stock Directors, voting together as a single class (with such voting power measured based on the voting power to elect Preferred Stock Directors).
(c) Senior Issuances; Adverse Changes. So long as any shares of Series B Preferred Stock are outstanding, but subject to the final paragraph of this Section 7(c), in addition to any other vote or consent of holders of the Company’s capital stock required by Delaware law, the vote or consent of the holders of at least two-thirds of the voting power of the Series B Preferred Stock and the holders of any other preferred stock entitled to vote thereon, voting together as a single class, given in person or by proxy at an annual or special meeting of stockholders, or given in writing without a meeting, will be necessary for effecting or validating any of the following actions, whether or not such approval is required by Delaware law:
(i) any amendment, alteration or repeal of any provision of the Company’s certificate of incorporation (including the certificate of designations creating the Series B Preferred Stock) or the Company’s by-laws that would alter or change the voting powers, preferences, economic rights or special rights of the Series B Preferred Stock so as to affect them adversely;
(ii) any amendment or alteration of the Company’s certificate of incorporation to authorize or create, or increase the authorized amount of, any shares of, or any securities convertible into shares of, any class or series of the Company's capital stock ranking prior to the Series B Preferred Stock in the payment of dividends or in the distribution of assets on any liquidation, dissolution, or winding up of the Company; or
(iii) the consummation of a binding share exchange or reclassification involving the Series B Preferred Stock or a merger or consolidation of the Company with another entity, except that holders of Series B Preferred Stock will have no right to vote under this provision or otherwise under Delaware law if in each case (i) the Series B Preferred Stock remains outstanding or, in the case of any such merger or consolidation with respect to which the Company is not the surviving or resulting entity, is converted into or exchanged for preferred securities of the surviving or resulting entity or its ultimate parent, that is an entity organized and existing under the laws of the United States of America, any state thereof or the District of Columbia and that is a corporation for U.S. federal income tax purposes (or if such entity is not a corporation, the Company having received an opinion of nationally recognized counsel experienced in such matters to the effect that Holders will be subject to tax for U.S. federal income tax purposes with respect to such new preferred securities after such merger or
consolidation in the same amount, at the same time and otherwise in the same manner as would have been the case under the Series B Preferred Stock prior to such merger or consolidation), and (ii) such Series B Preferred Stock remaining outstanding or such preferred securities, as the case may be, have such rights, preferences, privileges and voting powers, taken as a whole, as are not materially less favorable to the holders thereof than the rights, preferences, privileges and voting powers of the Series B Preferred Stock, taken as a whole;
provided, however, that, for the avoidance of doubt, any increase in the amount of the authorized or issued Series B Preferred Stock or authorized preferred stock or any securities convertible into preferred stock or the creation and issuance, or an increase in the authorized or issued amount, of other series of preferred stock or any securities convertible into preferred stock ranking equally with and/or junior to the Series B Preferred Stock with respect to the payment of dividends (whether such dividends are cumulative or noncumulative) and/or the distribution of assets upon the Company’s liquidation, dissolution or winding up will not be deemed to adversely affect the voting powers, preferences or special rights of the Series B Preferred Stock, and no stockholder will have the right to vote on such an increase, creation or issuance by reason of this Section 7.
If any amendment, alteration, repeal, share exchange, reclassification, merger or consolidation specified in this Section 7(c) would adversely affect the Series B Preferred Stock but not all series of preferred stock of the Company, then only such series of preferred stock as are adversely affected by and entitled to vote on the matter shall vote on the matter together with the Series B Preferred Stock as a single class (in lieu of all other series of preferred stock) for purposes of the vote or consent required by this Section 7(c).
(d) No Vote if Redemption. No vote or consent of the Holders shall be required pursuant to Section 7(b) or 7(c) if, at or prior to the time when the act with respect to such vote or consent would otherwise be required shall be effected, the Company shall have redeemed or shall have called for redemption all outstanding shares of Series B Preferred Stock, with proper notice and sufficient funds having been set aside for such redemption, in each case pursuant to Section 6 above.
Section 8. Preemption and Conversion Rights.
The Holders shall not have any preemptive rights or conversion rights as a result of the terms hereof.
Section 9. Rank.
For the avoidance of doubt, the Board of Directors or any duly authorized committee thereof may, without the vote of the Holders, authorize and issue additional shares of Junior Stock or shares of any class or series of stock of the Company now existing or hereafter authorized that ranks equally with the Series B Preferred Stock in the payment of dividends or in the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the Company.
Section 10. Reacquired Shares.
The Board of Directors shall take such actions as are necessary to cause the shares of Series B Preferred Stock which have been redeemed or otherwise purchased or acquired by the Company to be retired and restored to the status of authorized but unissued shares of preferred stock without designation as to series.
Section 11. No Sinking Fund.
Shares of Series B Preferred Stock are not subject to the operation of a sinking fund.
Section 12. Transfer Agent, Calculation Agent, Registrar and Paying Agent.
The duly appointed Transfer Agent, Calculation Agent, Registrar and paying agent for the Series B Preferred Stock shall be Computershare Trust Company, N.A. The Company may, in its sole discretion, remove the Transfer Agent in accordance with the agreement between the Company and the Transfer Agent; provided, however, that the Company shall appoint a successor transfer agent who shall accept such appointment prior to the effectiveness of such removal. Upon any such removal or appointment, the Company shall send notice thereof by first-class mail, postage prepaid, to the Holders.
Section 13. Replacement Certificates for Mutilated, Destroyed, Stolen and Lost Certificates.
If physical certificates are issued, the Company shall replace any mutilated certificate at the Holder’s expense upon surrender of that certificate to the Transfer Agent. The Company shall replace certificates that become destroyed, stolen or lost at the Holder’s expense upon delivery to the Company and the Transfer Agent of satisfactory evidence that the certificate has been destroyed, stolen or lost, together with any indemnity that may be required by the Transfer Agent and the Company.
Section 14. Form.
(a) Series B Preferred Stock Certificates. Series B Preferred Stock shall be issued in certificated form in substantially the form attached hereto as Exhibit A (each, a “Series B Preferred Stock Certificate”). Exhibit A is hereby incorporated in and expressly made a part of this Certificate of Designations. The Series B Preferred Stock Certificates may have notations, legends or endorsements required by law, stock exchange rules, agreements to which the Company is subject, if any, or usage (provided that any such notation, legend or endorsement is in a form acceptable to the Company).
(b) Signature. Two Officers shall sign any Series B Preferred Stock Certificate for the Company, in accordance with the Company’s by-laws and applicable law, by manual or facsimile signature. If an Officer whose signature is on a Series B Preferred Stock Certificate no longer holds that office at the time the Transfer Agent countersigned the Series B Preferred Stock Certificate, such Series B Preferred Stock Certificate shall be valid nevertheless. A Series B Preferred Stock Certificate shall not be valid until an authorized signatory of the Transfer Agent manually countersigns such Series B Preferred Stock Certificate. Each Series B Preferred Stock Certificate shall be dated the date of its countersignature.
Section 15. Taxes.
(a) Transfer Taxes. The Company shall pay any and all stock transfer, documentary, stamp and similar taxes that may be payable in respect of any issuance or delivery of shares of Series B Preferred Stock. The Company shall not, however, be required to pay any such tax that may be payable in respect of any transfer involved in the issuance or delivery of shares of Series B Preferred Stock, in a name other than that in which the shares of Series B Preferred Stock were registered, or in respect of any payment to any Person other than a payment to the registered holder thereof, and shall not be required to make any such issuance, delivery or payment unless and until the Person otherwise entitled to such issuance, delivery or payment has paid to the Company the amount of any such tax or has established, to the satisfaction of the Company, that such tax has been paid or is not payable.
(b) Withholding. All payments and distributions (or deemed distributions) on the shares of Series B Preferred Stock shall be subject to withholding and backup withholding of tax to the extent required by law, subject to applicable exemptions, and amounts withheld, if any, shall be treated as received by Holders.
Section 16. Notices.
All notices referred to herein shall be in writing, and, unless otherwise specified herein, all notices hereunder shall be deemed to have been given upon the earlier of receipt thereof or three Business Days after the mailing thereof if sent by registered or certified mail (unless first class mail shall be specifically permitted for such notice under the terms of this Certificate of Designations) with postage prepaid, addressed: (i) if to the Company, to its office at 399 Park Avenue, New York, New York 10043 (Attention: Corporate Secretary) or to the Transfer Agent at its office at 250 Royall Street, Canton, Massachusetts 02021, or other agent of the Company designated as permitted by this Certificate of Designations, or (ii) if to any Holder, to such Holder at the address of such Holder as listed in the stock record books of the Company (which may include the records of the Transfer Agent) or (iii) to such other address as the Company or any such Holder, as the case may be, shall have designated by notice similarly given.
Section 17. Other Rights Disclaimed.
The shares of Series B Preferred Stock have no voting powers, preferences or relative, participating, optional or other special rights, or qualifications, limitations or restrictions thereof, other than as set forth herein or in the Certificate of Incorporation of the Company.
IN WITNESS WHEREOF, this Certificate of Designations as has been executed on behalf of the Company by its Chief Financial Officer this 12th day of December, 2012.
CITIGROUP INC.
By: /s/ John C. Gerspach Name: John C. Gerspach Title: Chief Financial Officer
FORM OF 5.90% FIXED RATE / FLOATING RATE NONCUMULATIVE PREFERRED STOCK, SERIES B
Certificate Number_______ Number of Shares of Series A Preferred Stock______
CUSIP NO.:
CITIGROUP INC.
% Fixed Rate / Floating Rate Noncumulative Preferred Stock, Series B
(par value $1.00 per share) (liquidation preference $25,000 per share)
Citigroup Inc., a Delaware corporation (the “Company”), hereby certifies that [ ] (the “Holder”) is the registered owner of [ ] fully paid and non-assessable shares of the Company’s designated % Fixed Rate / Floating Rate Noncumulative Preferred Stock, Series B, with a par value of $1.00 per share and a liquidation preference of $25,000 per share (the “Series B Preferred Stock”). The shares of Series B Preferred Stock are transferable on the books and records of the Registrar, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer. The designations, rights, privileges, restrictions, preferences and other terms and provisions of the Series B Preferred Stock represented hereby are and shall in all respects be subject to the provisions of the Certificate of Designations dated December [ ], 2012 as the same may be amended from time to time (the “Certificate of Designations”). Capitalized terms used herein but not defined shall have the meaning given them in the Certificate of Designations. The Company will provide a copy of the Certificate of Designations to a Holder without charge upon written request to the Company at its principal place of business.
Reference is hereby made to select provisions of the Series B Preferred Stock set forth on the reverse hereof, and to the Certificate of Designations, which select provisions and the Certificate of Designations shall for all purposes have the same effect as if set forth at this place.
Upon receipt of this certificate, the Holder is bound by the Certificate of Designations and is entitled to the benefits thereunder.
Unless the Registrar has properly countersigned, these shares of Series B Preferred Stock shall not be entitled to any benefit under the Certificate of Designations or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, this certificate has been executed on behalf of the Company by its [Title] and by its [Title] this __ day of ________, ________.
CITIGROUP INC.
By: _______________________________________ Name: Title:
By: _______________________________________ Name: Title:
REGISTRAR’S COUNTERSIGNATURE
These are shares of Series B Preferred Stock referred to in the within-mentioned Certificate of Designations.
Dated:
COMPUTERSHARE TRUST COMPANY, N.A., as Registrar
By: _______________________________________ Name: Title:
REVERSE OF CERTIFICATE
Dividends on each share of Series B Preferred Stock shall be payable at the rate provided in the Certificate of Designations.
The shares of Series B Preferred Stock shall be redeemable at the option of the Company in the manner and in accordance with the terms set forth in the Certificate of Designations.
The Company shall furnish without charge to each holder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class or series of share capital issued by the Company and the qualifications, limitations or restrictions of such preferences and/or rights.
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers the shares of Series B Preferred Stock evidenced hereby to:
___________________________________________________
___________________________________________________
(Insert assignee’s social security or taxpayer identification number, if any)
___________________________________________________
___________________________________________________
(Insert address and zip code of assignee)
and irrevocably appoints:
___________________________________________________
___________________________________________________
as agent to transfer the shares of Series A Preferred Stock evidenced hereby on the books of the Transfer Agent. The agent may substitute another to act for him or her.
Date:
Signature:
___________________________________________________
(Sign exactly as your name appears on the other side of this Certificate)
Signature Guarantee: ___________________________________________________
(Signature must be guaranteed by an “eligible guarantor institution” that is a bank, stockbroker, savings and loan association or credit union meeting the requirements of the Transfer Agent, which requirements include membership or participation in the Securities Transfer Agents Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Transfer Agent in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.)
CERTIFICATE OF OWNERSHIP AND MERGER
MERGING
CITIGROUP FUNDING INC.
(a Delaware corporation)
WITH AND INTO
CITIGROUP INC.
(a Delaware corporation)
(Pursuant to Section 253 of the
Delaware General Corporation Law)
Citigroup Inc., a Delaware corporation (“Citigroup”), does hereby certify:
FIRST: Citigroup owns all of the outstanding shares of capital stock of Citigroup Funding Inc., a Delaware corporation (“CFI”).
SECOND: The Board of Directors of Citigroup adopted certain resolutions at a meeting of the Board of Directors held on June 18, 2012, including the following duly adopted resolutions in which the Board of Directors determined to merge CFI with and into Citigroup pursuant to Section 253 of the General Corporation Law of the State of Delaware:
RESOLVED, that, based upon all of the factors discussed at this meeting and the information provided to the members of the Board of Directors (the “Board”) of Citigroup Inc. (“Citigroup”), the Board hereby determines that it is advisable and in the best interest of Citigroup and its shareholders to merge Citigroup Funding Inc. (“CFI”), a Delaware corporation and a wholly-owned subsidiary of Citigroup, with and into Citigroup (the “Merger”); and be it
FURTHER RESOLVED, (a) that, effective upon the filing of a Certificate of Ownership and Merger with the Office of the Secretary of State of the State of Delaware or at such time as such Certificate of Ownership and Merger shall specify, CFI shall merge with and into Citigroup, and Citigroup shall be the surviving corporation, pursuant to Section 253 of the General Corporation Law of the State of Delaware (the “DGCL”), (b) that, by virtue of the Merger, each issued and outstanding share of common stock of CFI shall be cancelled, no consideration shall be delivered in exchange therefor and the separate existence of CFI shall cease, (c) that simultaneously with the Merger, Citigroup shall assume all of the rights and obligations of CFI existing immediately prior to the Merger, including, but not limited to, the obligation to pay the principal of and interest and premium, if any, on all of CFI’s outstanding notes, bonds and commercial paper, and the obligation to pay amounts due on CFI’s other outstanding funding obligations, instruments or securities, including, but not limited to, its index warrants, (d) that Citigroup shall be, and hereby is, authorized to enter into any and all contracts, instruments, indentures, agreements and other documents and any supplements or amendments thereto as deemed appropriate, advisable or necessary by an Authorized Officer in connection with the Merger and the assumption of the rights and obligations described in the preceding clause (c), (e) that the Certificate of Incorporation and By-Laws of Citigroup as in effect immediately prior to the effectiveness of the Merger shall be the Certificate of Incorporation and By-Laws of such surviving
corporation and shall continue in full force and effect until amended and changed in the manner prescribed by the provisions of the DGCL, and (f) that the officers and directors of Citigroup immediately prior to the Merger shall be the officers and directors of such surviving corporation; and be it
FURTHER RESOLVED, that the Chief Executive Officer, the President, any Vice Chairman, the Chief Financial Officer, the General Counsel, the Corporate Secretary, the Chief Accounting Officer, the Treasurer, the Deputy Treasurer or any officer with the authority of a Vice President of Citigroup (each, and “Authorized Officer”) be, and each of them hereby is, authorized and directed to execute, in the name and on behalf of Citigroup, a Certificate of Ownership and Merger with respect to the Merger setting forth, among other things, a copy of the resolutions of the Board authorizing the Merger and the date of their adoption, and to cause such documents to be filed in the Office of the Secretary of State of the State of Delaware in accordance with Sections 103 and 253 of the DGCL.
THIRD: That this Certificate of Ownership and Merger (and the Merger referenced herein) shall be effective at 11:58 p.m. (local time in Wilmington, Delaware) on December 31, 2012.
[Signature page follows]
IN WITNESS WHEREOF, Citigroup Inc. has caused this Certificate of Ownership and Merger to be executed by its duly authorized officer on the date set forth below.
CITIGROUP INC.
By: /s/ Joseph Bonocore
Name: Joseph Bonocore
Title: Deputy Treasurer
Dated: December 12, 2012
CERTIFICATE OF DESIGNATIONS
OF
5.80% NONCUMULATIVE PREFERRED STOCK SERIES C
OF
CITIGROUP INC.
______________________________
pursuant to Section 151 of the
General Corporation Law of the State of Delaware
______________________________
Citigroup Inc., a Delaware corporation (the “Company”), hereby certifies that:
1. The Restated Certificate of Incorporation of the Company (as amended through the date hereof, the “Certificate of Incorporation”) fixes the total number of shares of all classes of capital stock that the Company shall have the authority to issue at six billion (6,000,000,000) shares of common stock, par value $0.01 per share, and thirty million (30,000,000) shares of preferred stock, par value $1.00 per share.
2. The Certificate of Incorporation expressly grants to the Board of Directors of the Company (the “Board of Directors”) authority to provide for the issuance of the shares of preferred stock in series, and to establish from time to time the number of shares to be included in each such series and to fix the designation, powers, preferences and rights of the shares of each such series and the qualifications, limitations or restrictions thereof.
3. Pursuant to the authority conferred upon a pricing committee (the “Pricing Committee”) by the Board of Directors, the Pricing Committee, by action duly taken on March 19, 2013, adopted resolutions (i) authorizing the issuance and sale of up to 23,000 shares of the Company’s preferred stock and (ii) approving this final form of Certificate of Designations of 5.80% Noncumulative Preferred Stock, Series C (the “Series C Preferred Stock”) establishing the number of shares to be included in this Series C Preferred Stock and fixing the designation, powers, preferences and rights of the shares of this Series C Preferred Stock and the qualifications, limitations or restrictions thereof as follows:
Section 1. Designation.
The designation of the series of preferred stock shall be “5.80% Noncumulative Preferred Stock, Series C” (the “Series C Preferred Stock”). Each share of Series C Preferred Stock shall be identical in all respects to every other share of Series C Preferred Stock. Series C Preferred
Stock will rank equally with Parity Stock, will rank senior to Junior Stock and will rank junior to
Senior Stock, if any, with respect to the payment of dividends and/or the distribution of assets in the event of any voluntary or involuntary liquidation, dissolution or winding up of affairs of the
Company.
Section 2. Number of Shares.
The number of authorized shares of Series C Preferred Stock shall be 23,000. That number from time to time may be increased (but not in excess of the total number of authorized shares of preferred stock) or decreased (but not below the number of shares of Series C Preferred Stock then outstanding) by further resolution duly adopted by the Board of Directors, the Pricing Committee or any other duly authorized committee thereof and by the filing of a certificate pursuant to the provisions of the General Corporation Law of the State of Delaware stating that such increase or reduction, as the case may be, has been so authorized. The Company shall have the authority to issue fractional shares of Series C Preferred Stock.
Section 3. Definitions. As used herein with respect to Series C Preferred Stock:
“Appropriate Federal Banking Agency” means the “appropriate federal banking agency” with respect to the Company as that term is defined in Section 3(q) of the Federal Deposit Insurance Act of 1950, as amended, or any successor provision.
“Board of Directors” has the meaning set forth in the recitals above.
“Business Day” means any weekday that is not a legal holiday in New York City and is not a day on which banking institutions in New York City are authorized or required by law or regulation to be closed.
“Calculation Agent” means the Transfer Agent acting in its capacity as calculation agent for the Series C Preferred Stock, and its successors and assigns.
“Common Stock” means the common stock of the Company, par value $0.01 per share, or any other shares of the capital stock of the Company into which such shares of common stock shall be reclassified or changed.
“Depositary” means DTC or its nominee or any successor depositary appointed by the Company.
“Dividend Payment Date” shall have the meaning set forth in Section 4(a) hereof.
“Dividend Period” shall have the meaning set forth in Section 4(a) hereof.
“Dividend Record Date” shall have the meaning set forth in Section 4(a) hereof.
“DTC” means The Depository Trust Company.
“Holder” means the Person in whose name the shares of the Series C Preferred Stock are registered, which may be treated by the Company, Calculation Agent, Transfer Agent, Registrar and paying agent as the absolute owner of the shares of Series C Preferred Stock for the purpose of making payment and for all other purposes.
“Junior Stock” means the Common Stock and any other class or series of stock of the Company now existing or hereafter authorized over which Series C Preferred Stock has preference or priority in the payment of dividends or in the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the Company.
“Nonpayment” shall have the meaning set forth in Section 7(b)(i) hereof.
“Officer” means the Chief Executive Officer, the Chairman, the Chief Administrative Officer, any Vice Chairman, the Chief Financial Officer, the Controller, the Chief Accounting Officer, the Treasurer, any Deputy Treasurer, any Assistant Treasurer, any Vice President, the General Counsel and Corporate Secretary and any Assistant Secretary of the Company.
“Person” means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint-stock company, limited liability company, trust, or other entity.
“Preferred Stock Director” shall have the meaning set forth in Section 7(b)(i) hereof.
“Preferred Stock Director Termination Date” shall have the meaning set forth in Section 7(b)(iv) hereof.
“Registrar” means the Transfer Agent acting in its capacity as registrar for the Series C Preferred Stock, and its successors and assigns.
“Regulatory Capital Event” means the good faith determination by the Company that, as a result of (i) any amendment to, clarification of, or change in, the laws or regulations of the United States or any political subdivision of or in the United States that is enacted or becomes effective after the initial issuance of any share of the Series C Preferred Stock, (ii) any proposed change in those laws or regulations that is announced or becomes effective after the initial issuance of any share of the Series C Preferred Stock, or (iii) any official administrative decision or judicial decision or administrative action or other official pronouncement interpreting or applying those laws or regulations or policies with respect thereto that is announced after the initial issuance of any share of the Series C Preferred Stock, there is more than an insubstantial risk that the Company will not be entitled to treat the full liquidation preference amount of $25,000 per share of the Series C Preferred Stock then outstanding as “tier 1 capital” (or its equivalent) for purposes of the capital adequacy guidelines of the Federal Reserve (or, as and if applicable, the capital adequacy guidelines or regulations of any successor Appropriate Federal Banking Agency) as then in effect and applicable, for so long as any share of the Series C Preferred Stock is outstanding.
"Series C Liquidation Preference" shall have the meaning set forth in Section 5(a) hereof.
“Series C Preferred Stock” shall have the meaning set forth in Section 1 hereof.
“Series C Preferred Stock Certificate” shall have the meaning set forth in Section 14(a) hereof.
“Transfer Agent” means Computershare Trust Company, N.A., a federally chartered national association, acting as Transfer Agent, Calculation Agent, Registrar and paying agent for the Series C Preferred Stock, and its successors and assigns.
“Trust” shall have the meaning set forth in Section 6(d).
Section 4. Dividends.
(a) Rate. Holders shall be entitled to receive, when, as and if declared by the Board of Directors or any duly authorized committee thereof, but only out of funds legally available therefor, noncumulative cash dividends on each share of Series C Preferred Stock in the amounts specified below in this Section 4, and no more, payable (i) quarterly in arrears on each April 22, July 22, October 22 and January 22, beginning July 22, 2013; , provided, however, if any such day is not a Business Day, then payment of any dividend otherwise payable on that date will be made on the next succeeding day that is a Business Day, (without any interest or other payment in respect of such delay) (each such day on which dividends are payable a “Dividend Payment Date”). The period from and including the date of issuance of the Series C Preferred Stock or any Dividend Payment Date to, but excluding, the next Dividend Payment Date is a “Dividend Period.” Dividends on each share of Series C Preferred Stock will accrue on the liquidation preference of $25,000 per share at a rate per annum equal to 5.80%. The record date for payment of dividends on the Series C Preferred Stock will be the record date fixed by the Board of Directors or any other duly authorized committee thereof that is not more than 30 nor less than 10 days prior to such Dividend Payment Date (each, a “Dividend Record Date”). Any such day that is a Dividend Record Date will be a Dividend Record Date whether or not such day is a Business Day. The amount of dividends payable will be computed on the basis of a 360-day year of twelve 30-day months.
(b) Noncumulative Dividends. If the Board of Directors or any duly authorized committee thereof does not declare a dividend on the Series C Preferred Stock for any Dividend Period prior to the related Dividend Payment Date, that dividend will not accrue, and the Company will have no obligation to pay, and Holders shall have no right to receive, a dividend for that Dividend Period on the related Dividend Payment Date or at any future time, whether or not dividends on the Series C Preferred Stock or any other series of preferred stock or common stock are declared for any subsequent period. References herein to the “accrual” of dividends refer only to the determination of the amount of such dividend and do not imply that any right to a dividend arises prior to the date on which a dividend is declared.
(c) Priority of Dividends. So long as any share of Series C Preferred Stock remains outstanding, unless as to a Dividend Payment Date full dividends on all outstanding shares of the Series C Preferred Stock have been declared and paid or declared and a sum sufficient for the payment of those dividends has been set aside for the Dividend Period then ending, the Company will not, and will cause its subsidiaries not to, during the next succeeding Dividend Period that commences on such Dividend Payment Date, declare or pay any dividend on, make any distributions relating to, or redeem, purchase, acquire or make a liquidation payment relating to, any Junior Stock, or make any guarantee payment with respect thereto, other than:
(i) purchases, redemptions or other acquisitions of shares of Junior Stock in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of employees, officers, directors or consultants;
(ii) purchases of shares of Common Stock pursuant to a contractually binding requirement to buy stock existing prior to the commencement of the then-current Dividend Period, including under a contractually binding stock repurchase plan;
(iii) as a result of an exchange or conversion of any class or series of Junior Stock for any other class or series of Junior Stock;
(iv) the purchase of fractional interests in shares of Junior Stock pursuant to the conversion or exchange provisions of such Junior Stock or the security being converted or exchanged;
(v) the purchase of Junior Stock by an investment banking subsidiary of the Company in connection with the distribution thereof; or
(vi) the purchase of Junior Stock by any investment banking subsidiary of the Company in connection with market-making or other secondary market activities in the ordinary course of the business of such subsidiary.
The restrictions set forth in the preceding provisions of this Section 4(c) shall not apply to any Junior Stock dividends paid by the Company where the dividend is in the form of the same stock (or the right to buy the same stock) as that on which the dividend is being paid.
Except as provided below, for so long as any share of Series C Preferred Stock remains outstanding, if dividends are not declared and paid in full upon the shares of Series C Preferred Stock and any class or series of stock of the Company now existing or hereafter authorized that ranks equally with the Series C Preferred Stock in the payment of dividends, all dividends declared upon shares of Series C Preferred Stock and such other stock will be declared on a proportional basis so that the amount of dividends declared per share will bear to each other the same ratio that accrued dividends for the then-current Dividend Period per share of Series C Preferred Stock and accrued dividends for the then-current Dividend Period per share of such other stock (including, in the case of any such other stock that bears cumulative dividends, all accrued and unpaid dividends) bear to each other.
Subject to the foregoing, and not otherwise, such dividends payable in cash, stock or otherwise, as may be determined by the Board of Directors or any duly authorized committee thereof, may be declared and paid on any other class or series of stock of the Company from time to time out of any funds legally available for such payment, and Holders will not be entitled to participate in those dividends.
Section 5. Liquidation Rights.
(a) Liquidation. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company, Holders shall be entitled, out of funds legally available therefor, before any distribution or payment may be made by the Company or set aside for the holders of any Junior Stock and subject to the rights of the holders of any class or series of stock ranking senior to or on parity with Series C Preferred Stock upon liquidation and the rights of the Company’s depositors and other creditors, to receive in full a liquidating distribution in the amount of the liquidation preference of $25,000 per share (the “Series C Liquidation Preference”), plus any accrued dividends thereon from the last Dividend Payment Date to, but excluding, the date of the liquidation, dissolution or winding up if and to the extent declared but not yet paid. Holders shall not be entitled to any further payments in the event of any such voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company other than what is expressly provided for in this Section 5.
(b) Partial Payment. If the assets of the Company are not sufficient to pay in full the aforesaid liquidation distributions to the Holders and any liquidation distributions owed to holders of any class or series of stock of the Company ranking equally with the Series C Preferred Stock in the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the Company, the amounts paid to the Holders and to the holders of all such equally ranking stock shall be pro rata in accordance with the respective aggregate liquidating distributions to which they would otherwise be entitled.
(d) Merger, Consolidation and Sale of Assets Not Liquidation. For purposes of this Section 5, the sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the property and assets of the Company shall not be deemed a voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, nor shall the merger, consolidation or any other business combination transaction of the Company into or with any other corporation or Person or the merger, consolidation or any other business combination transaction of any other corporation or Person into or with the Company be deemed to be a voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company.
Section 6. Redemption.
(a) Optional Redemption. The Company, at the option of its Board of Directors or any duly authorized committee thereof, may redeem out of funds legally available therefor, (i) in whole or in part, from time to time, the shares of Series C Preferred Stock at the time outstanding, on any Dividend Payment Date on or after April 22, 2018, or (ii) in whole but not in part at any time within 90 days following a Regulatory Capital Event, in each case at a redemption price equal to $25,000 per share plus any declared and unpaid dividends, without accumulation of any undeclared dividends, to but excluding the redemption date, upon notice given as provided in Section 6(b) below.
(b) Notice of Redemption. Notice of every redemption of shares of Series C Preferred Stock shall be mailed by first class mail, postage prepaid, addressed to the Holders of such shares to be redeemed at their respective last addresses appearing on the stock register of the Company. Such mailing shall be at least 30 days and not more than 60 days before the date fixed for redemption. Any notice mailed as provided in this Section 6(b) shall be conclusively presumed to have been duly given, whether or not the Holder receives such notice, but failure duly to give such notice by mail, or any defect in such notice or in the mailing thereof, to any Holder of shares of Series C Preferred Stock designated for redemption shall not affect the validity of the proceedings for the redemption of any other shares of Series C Preferred Stock. Each notice shall state:
(i) the redemption date;
(ii) the total number of shares of Series C Preferred Stock to be redeemed and, if fewer than all the shares of a Holder are to be redeemed, the number of such shares to be redeemed;
(iii) the redemption price;
(iv) the place or places where the certificates for such shares are to be surrendered for payment of the redemption price, if applicable; and
(v) that dividends on the shares to be redeemed will cease to accrue on the redemption date.
Notwithstanding the foregoing, if the certificates evidencing the shares of Series C Preferred Stock are held of record by a depositary and any related depository shares are held of record by a Depositary or its nominee, the Company may give such notice in any manner permitted by the Depositary.
(c) Partial Redemption. In case of any redemption of only part of the shares of Series A Preferred Stock at the time outstanding, the shares of Series C Preferred Stock to be redeemed shall be selected pro rata from the Holders in proportion to the number of shares of Series C Preferred Stock held by such Holders, by lot or in such other manner as the Board of Directors or any duly authorized committee thereof may determine, in its sole discretion, to be fair and equitable. Subject to the provisions of this Section 6, the Board of Directors or any duly authorized committee thereof shall have full power and authority to prescribe the terms and conditions upon which shares of Series C Preferred Stock shall be redeemed from time to time.
(d) Effectiveness of Redemption. If notice of redemption has been duly given and if on or before the redemption date specified in the notice all funds necessary for the redemption have been set aside by the Company, separate and apart from its other assets, for the pro rata benefit of the Holders of the shares called for redemption, so as to be and continue to be available therefor, or deposited by the Company with a bank or trust company selected by the Board of Directors or any duly authorized committee thereof (the “Trust”) in trust for the pro rata benefit of the
Holders of the shares called for redemption, then, notwithstanding that any certificate for any share so called for redemption has not been surrendered for cancellation, on and after the redemption date all shares so called for redemption shall cease to be outstanding, all dividends with respect to such shares shall cease to accrue on such redemption date, and all rights with respect to such shares shall forthwith on such redemption date cease and terminate, except only the right of the Holders thereof to receive the amount payable on such redemption from the Trust at any time after the redemption date from the funds so deposited, without interest. The Company shall be entitled to receive, from time to time, from the Trust any interest accrued on such funds, and the Holders of any shares called for redemption shall have no claim to any such interest. Any funds so deposited and unclaimed at the end of three years from the redemption date shall, to the extent permitted by law, be released or repaid to the Company, and in the event of such repayment to the Company, the Holders of the shares so called for redemption shall be deemed to be unsecured creditors of the Company for an amount equivalent to the amount deposited as stated above for the redemption of such shares and so repaid to the Company, but shall in no event be entitled to any interest.
Section 7. Voting Rights.
(a) General. The Holders shall not be entitled to vote on any matter except as set forth in Section 7(b) below or as required by the Delaware General Corporation Law.
(b) Special Voting Right.
(i) Voting Right. If and whenever dividends on the Series C Preferred Stock or any other class or series of preferred stock that ranks on parity with Series C Preferred Stock as to payment of dividends and upon which voting rights equivalent to those granted by this Section 7(b)(i) have been conferred and are exercisable (any such class or series being referred to herein as “dividend parity stock”) have not been paid in an aggregate amount equal, as to any class or series, to at least three semi-annual or six quarterly Dividend Periods, as applicable, (whether consecutive or not) (a “Nonpayment”), the authorized number of directors constituting the Board of Directors shall be increased by two, and the Holders, together with holders of dividend parity stock, shall have the right, voting separately as a single class without regard to class or series (and with voting rights allocated pro rata based on the liquidation preference of each such class or series), to the exclusion of the holders of Common Stock, to elect two directors of the Company to fill such newly created directorships (and to fill any vacancies in the terms of such directorships), provided that it shall be a qualification for election of any such director that the election of such director shall not cause the Company to violate the corporate governance requirements of the New York Stock Exchange (or other exchange on which the Company’s securities may be listed) that listed companies must have a majority of independent directors and further provided that the Board of Directors shall at no time include more than two such directors. Each such director elected by the Holders together with holders of dividend parity stock is a “Preferred Stock Director.”
(ii) Election. The election of the Preferred Stock Directors will take place at any annual meeting of stockholders or any special meeting of the Holders and any dividend parity stock, called as provided herein. At any time after the special voting power has vested pursuant to Section 7(b)(i) above, the secretary of the Company may, and upon the written request (addressed to the secretary at the Company’s principal office) of the holders of at least 20% of the voting power of the Series C Preferred Stock or the holders of at least 20% of the voting power of any series of dividend parity stock (with such voting power measured based on the voting power to elect Preferred Stock Directors), must (unless such request is received less than 90 days before the date fixed for the next annual or special meeting of the stockholders at which Preferred Stock Directors are to be elected, in which event such election shall be held at such next annual or special meeting of stockholders), call a special meeting of the holders of Series C Preferred Stock and any dividend parity stock for the purposes of electing Preferred Stock Directors. The Preferred Stock Directors shall each be entitled to one vote per director on any matter.
(iii) Notice of Special Meeting. Notice for a special meeting to elect Preferred Stock Directors will be given in a similar manner to that provided in the Company’s by-laws for a special meeting of the stockholders. If the secretary of the Company does not call a special meeting within 20 days after receipt of any such request, then any Holder may (at the expense of the Company) call such meeting, upon notice as provided in this Section 7(b)(iii), and for that purpose will have access to the stock register of the Company. The Preferred Stock Directors elected at any such special meeting and each Preferred Stock Director elected at a subsequent annual or special meeting of stockholders, will be elected for term expiring upon the earlier of the Preferred Stock Director Termination Date and the next annual meeting of stockholders following such Preferred Stock Director's election. In case any vacancy in the office of a Preferred Stock Director occurs (other than prior to the initial election of the Preferred Stock Directors), the vacancy may be filled by the Preferred Stock Director remaining in office, or if none remains in office, by a plurality of the votes cast by the holders of Series C Preferred Stock and any dividend parity stock, voting together as a single class, and the Preferred Stock Director so appointed or elected to fill such vacancy shall serve for a term expiring at the next annual meeting of the stockholders. Preferred Stock Directors may only be elected by the holders of Series C Preferred Stock and dividend parity stock in accordance with this Section 7. If the holders of Series C Preferred Stock and such dividend parity stock fail to elect a sufficient number of directors to fill all directorships for which they are entitled to elect directors pursuant to this Section 7, then any directorship not so filled shall remain vacant until such time as the holders of Series C Preferred Stock and such dividend parity stock elect a person to fill such directorship in accordance with this Section 7, or such vacancy is otherwise filled in accordance with this Section 7; and no such directorship may be filled by stockholders of the Corporation other than in accordance with this Section 7.
(iv) Termination; Removal. Whenever the Company has paid noncumulative dividends in full for at least two consecutive semi-annual or four consecutive quarterly Dividend Periods following a Nonpayment on the Series C Preferred Stock and on any
dividend parity stock entitled to noncumulative dividends and has paid cumulative dividends in full on any dividend parity stock entitled to cumulative dividends, then the right of the Holders to elect the Preferred Stock Directors will cease (but subject always to the same provisions for the vesting of the special voting rights in the case of any similar non-payment of dividends in respect of future Dividend Periods) (the time of such cessation, the “Preferred Stock Director Termination Date”). Upon a Preferred Stock Director Termination Date, the terms of office of the Preferred Stock Directors will immediately terminate, the persons then serving as Preferred Stock Directors shall immediately cease to be qualified to hold office as Preferred Stock Directors, the Preferred Stock Directors shall cease to be directors of the Company and the number of directors constituting the Board of Directors shall be automatically reduced, without any action by the Board of Directors or the stockholders of the Company, by the number of Preferred Stock Directors authorized immediately prior to such termination. Any Preferred Stock Director may be removed at any time without cause by the holders of a majority of the voting power of outstanding shares of the capital stock then entitled to vote in the election of Preferred Stock Directors, voting together as a single class (with such voting power measured based on the voting power to elect Preferred Stock Directors).
(c) Senior Issuances; Adverse Changes. So long as any shares of Series C Preferred Stock are outstanding, but subject to the final paragraph of this Section 7(c), in addition to any other vote or consent of holders of the Company’s capital stock required by Delaware law, the vote or consent of the holders of at least two-thirds of the voting power of the Series C Preferred Stock and the holders of any other preferred stock entitled to vote thereon, voting together as a single class, given in person or by proxy at an annual or special meeting of stockholders, or given in writing without a meeting, will be necessary for effecting or validating any of the following actions, whether or not such approval is required by Delaware law:
(i) any amendment, alteration or repeal of any provision of the Company’s certificate of incorporation (including the certificate of designations creating the Series C Preferred Stock) or the Company’s by-laws that would alter or change the voting powers, preferences, economic rights or special rights of the Series C Preferred Stock so as to affect them adversely;
(ii) any amendment or alteration of the Company’s certificate of incorporation to authorize or create, or increase the authorized amount of, any shares of, or any securities convertible into shares of, any class or series of the Company's capital stock ranking prior to the Series C Preferred Stock in the payment of dividends or in the distribution of assets on any liquidation, dissolution, or winding up of the Company; or
(iii) the consummation of a binding share exchange or reclassification involving the Series C Preferred Stock or a merger or consolidation of the Company with another entity, except that holders of Series C Preferred Stock will have no right to vote under this provision or otherwise under Delaware law if in each case (i) the Series C Preferred Stock remains outstanding or, in the case of any such merger or consolidation with
respect to which the Company is not the surviving or resulting entity, is converted into or exchanged for preferred securities of the surviving or resulting entity or its ultimate parent, that is an entity organized and existing under the laws of the United States of America, any state thereof or the District of Columbia and that is a corporation for U.S. federal income tax purposes (or if such entity is not a corporation, the Company having received an opinion of nationally recognized counsel experienced in such matters to the effect that Holders will be subject to tax for U.S. federal income tax purposes with respect to such new preferred securities after such merger or consolidation in the same amount, at the same time and otherwise in the same manner as would have been the case under the Series C Preferred Stock prior to such merger or consolidation), and (ii) such Series C Preferred Stock remaining outstanding or such preferred securities, as the case may be, have such rights, preferences, privileges and voting powers, taken as a whole, as are not materially less favorable to the holders thereof than the rights, preferences, privileges and voting powers of the Series C Preferred Stock, taken as a whole;
provided, however, that, for the avoidance of doubt, any increase in the amount of the authorized or issued Series C Preferred Stock or authorized preferred stock or any securities convertible into preferred stock or the creation and issuance, or an increase in the authorized or issued amount, of other series of preferred stock or any securities convertible into preferred stock ranking equally with and/or junior to the Series C Preferred Stock with respect to the payment of dividends (whether such dividends are cumulative or noncumulative) and/or the distribution of assets upon the Company’s liquidation, dissolution or winding up will not be deemed to adversely affect the voting powers, preferences or special rights of the Series C Preferred Stock, and no stockholder will have the right to vote on such an increase, creation or issuance by reason of this Section 7.
If any amendment, alteration, repeal, share exchange, reclassification, merger or consolidation specified in this Section 7(c) would adversely affect the Series C Preferred Stock but not all series of preferred stock of the Company, then only such series of preferred stock as are adversely affected by and entitled to vote on the matter shall vote on the matter together with the Series C Preferred Stock as a single class (in lieu of all other series of preferred stock) for purposes of the vote or consent required by this Section 7(c).
(d) No Vote if Redemption. No vote or consent of the Holders shall be required pursuant to Section 7(b) or 7(c) if, at or prior to the time when the act with respect to such vote or consent would otherwise be required shall be effected, the Company shall have redeemed or shall have called for redemption all outstanding shares of Series C Preferred Stock, with proper notice and sufficient funds having been set aside for such redemption, in each case pursuant to Section 6 above.
Section 8. Preemption and Conversion Rights.
The Holders shall not have any preemptive rights or conversion rights as a result of the terms hereof.
Section 9. Rank.
For the avoidance of doubt, the Board of Directors or any duly authorized committee thereof may, without the vote of the Holders, authorize and issue additional shares of Junior Stock or shares of any class or series of stock of the Company now existing or hereafter authorized that ranks equally with the Series C Preferred Stock in the payment of dividends or in the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the Company.
Section 10. Reacquired Shares.
The Board of Directors shall take such actions as are necessary to cause the shares of Series C Preferred Stock which have been redeemed or otherwise purchased or acquired by the Company to be retired and restored to the status of authorized but unissued shares of preferred stock without designation as to series.
Section 11. No Sinking Fund.
Shares of Series C Preferred Stock are not subject to the operation of a sinking fund.
Section 12. Transfer Agent, Calculation Agent, Registrar and Paying Agent.
The duly appointed Transfer Agent, Calculation Agent, Registrar and paying agent for the Series C Preferred Stock shall be Computershare Trust Company, N.A. The Company may, in its sole discretion, remove the Transfer Agent in accordance with the agreement between the Company and the Transfer Agent; provided, however, that the Company shall appoint a successor transfer agent who shall accept such appointment prior to the effectiveness of such removal. Upon any such removal or appointment, the Company shall send notice thereof by first-class mail, postage prepaid, to the Holders.
Section 13. Replacement Certificates for Mutilated, Destroyed, Stolen and Lost Certificates.
If physical certificates are issued, the Company shall replace any mutilated certificate at the Holder’s expense upon surrender of that certificate to the Transfer Agent. The Company shall replace certificates that become destroyed, stolen or lost at the Holder’s expense upon delivery to the Company and the Transfer Agent of satisfactory evidence that the certificate has been destroyed, stolen or lost, together with any indemnity that may be required by the Transfer Agent and the Company.
Section 14. Form.
(a) Series C Preferred Stock Certificates. Series C Preferred Stock shall be issued in certificated form in substantially the form attached hereto as Exhibit A (each, a “Series C Preferred Stock Certificate”). Exhibit A is hereby incorporated in and expressly made a part of this Certificate of Designations. The Series C Preferred Stock Certificates may have notations, legends or endorsements required by law, stock exchange rules, agreements to which the Company is subject, if any, or usage (provided that any such notation, legend or endorsement is in a form acceptable to the Company).
(b) Signature. Two Officers shall sign any Series C Preferred Stock Certificate for the Company, in accordance with the Company’s by-laws and applicable law, by manual or facsimile signature. If an Officer whose signature is on a Series C Preferred Stock Certificate no longer holds that office at the time the Transfer Agent countersigned the Series C Preferred Stock Certificate, such Series C Preferred Stock Certificate shall be valid nevertheless. A Series C Preferred Stock Certificate shall not be valid until an authorized signatory of the Transfer Agent manually countersigns such Series C Preferred Stock Certificate. Each Series C Preferred Stock Certificate shall be dated the date of its countersignature.
Section 15. Taxes.
(a) Transfer Taxes. The Company shall pay any and all stock transfer, documentary, stamp and similar taxes that may be payable in respect of any issuance or delivery of shares of Series C Preferred Stock. The Company shall not, however, be required to pay any such tax that may be payable in respect of any transfer involved in the issuance or delivery of shares of Series C Preferred Stock, in a name other than that in which the shares of Series C Preferred Stock were registered, or in respect of any payment to any Person other than a payment to the registered holder thereof, and shall not be required to make any such issuance, delivery or payment unless and until the Person otherwise entitled to such issuance, delivery or payment has paid to the Company the amount of any such tax or has established, to the satisfaction of the Company, that such tax has been paid or is not payable.
(b) Withholding. All payments and distributions (or deemed distributions) on the shares of Series C Preferred Stock shall be subject to withholding and backup withholding of tax to the extent required by law, subject to applicable exemptions, and amounts withheld, if any, shall be treated as received by Holders.
Section 16. Notices.
All notices referred to herein shall be in writing, and, unless otherwise specified herein, all notices hereunder shall be deemed to have been given upon the earlier of receipt thereof or three Business Days after the mailing thereof if sent by registered or certified mail (unless first class mail shall be specifically permitted for such notice under the terms of this Certificate of Designations) with postage prepaid, addressed: (i) if to the Company, to its office at 399 Park Avenue, New York, New York 10043 (Attention: Corporate Secretary) or to the Transfer Agent at its office at 250 Royall Street, Canton, Massachusetts 02021, or other agent of the Company
designated as permitted by this Certificate of Designations, or (ii) if to any Holder, to such Holder at the address of such Holder as listed in the stock record books of the Company (which may include the records of the Transfer Agent) or (iii) to such other address as the Company or any such Holder, as the case may be, shall have designated by notice similarly given.
Section 17. Other Rights Disclaimed.
The shares of Series C Preferred Stock have no voting powers, preferences or relative, participating, optional or other special rights, or qualifications, limitations or restrictions thereof, other than as set forth herein or in the Certificate of Incorporation of the Company.
IN WITNESS WHEREOF, this Certificate of Designations as has been executed on behalf of the Company by its Chief Accounting Officer this 25th day of March, 2013.
CITIGROUP INC.
By: /s/John C. Gerspach
Name: John C. Gerspach
Title: Chief Financial Officer
Exhibit A
FORM OF 5.80% NONCUMULATIVE PREFERRED STOCK, SERIES C
Certificate Number_______ Number of Shares of Series C Preferred Stock______
CUSIP NO.:
CITIGROUP INC.
5.80% Noncumulative Preferred Stock, Series C
(par value $1.00 per share) (liquidation preference $25,000 per share)
Citigroup Inc., a Delaware corporation (the “Company”), hereby certifies that [ ] (the “Holder”) is the registered owner of [ ] fully paid and non-assessable shares of the Company’s designated 5.80% Noncumulative Preferred Stock, Series C, with a par value of $1.00 per share and a liquidation preference of $25,000 per share (the “Series C Preferred Stock”). The shares of Series C Preferred Stock are transferable on the books and records of the Registrar, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer. The designations, rights, privileges, restrictions, preferences and other terms and provisions of the Series C Preferred Stock represented hereby are and shall in all respects be subject to the provisions of the Certificate of Designations dated March 25, 2013 as the same may be amended from time to time (the “Certificate of Designations”). Capitalized terms used herein but not defined shall have the meaning given them in the Certificate of Designations. The Company will provide a copy of the Certificate of Designations to a Holder without charge upon written request to the Company at its principal place of business.
Reference is hereby made to select provisions of the Series C Preferred Stock set forth on the reverse hereof, and to the Certificate of Designations, which select provisions and the Certificate of Designations shall for all purposes have the same effect as if set forth at this place.
Upon receipt of this certificate, the Holder is bound by the Certificate of Designations and is entitled to the benefits thereunder.
Unless the Registrar has properly countersigned, these shares of Series C Preferred Stock shall not be entitled to any benefit under the Certificate of Designations or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, this certificate has been executed on behalf of the Company by its [Title] and by its [Title] this __ day of ________, ________.
CITIGROUP INC.
By: _______________________________________ Name: Title:
By: _______________________________________ Name: Title:
REGISTRAR’S COUNTERSIGNATURE
These are shares of Series C Preferred Stock referred to in the within-mentioned Certificate of Designations.
Dated:
COMPUTERSHARE TRUST COMPANY, N.A., as Registrar
By: _______________________________________ Name: Title:
REVERSE OF CERTIFICATE
Dividends on each share of Series C Preferred Stock shall be payable at the rate provided in the Certificate of Designations.
The shares of Series C Preferred Stock shall be redeemable at the option of the Company in the manner and in accordance with the terms set forth in the Certificate of Designations.
The Company shall furnish without charge to each holder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class or series of share capital issued by the Company and the qualifications, limitations or restrictions of such preferences and/or rights.
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers the shares of Series C Preferred Stock evidenced hereby to:
___________________________________________________
___________________________________________________
(Insert assignee’s social security or taxpayer identification number, if any)
___________________________________________________
___________________________________________________
(Insert address and zip code of assignee)
and irrevocably appoints:
___________________________________________________
___________________________________________________
as agent to transfer the shares of Series A Preferred Stock evidenced hereby on the books of the Transfer Agent. The agent may substitute another to act for him or her.
Date:
Signature:
___________________________________________________
(Sign exactly as your name appears on the other side of this Certificate)
Signature Guarantee: ___________________________________________________
(Signature must be guaranteed by an “eligible guarantor institution” that is a bank, stockbroker, savings and loan association or credit union meeting the requirements of the Transfer Agent, which requirements include membership or participation in the Securities Transfer Agents Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Transfer Agent in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.)
CERTIFICATE OF DESIGNATIONS
OF
5.350% FIXED RATE / FLOATING RATE NONCUMULATIVE PREFERRED STOCK,
SERIES D
OF
CITIGROUP INC.
______________________________
pursuant to Section 151 of the
General Corporation Law of the State of Delaware
______________________________
Citigroup Inc., a Delaware corporation (the “Company”), hereby certifies that:
1. The Restated Certificate of Incorporation of the Company (as amended through the date hereof, the “Certificate of Incorporation”) fixes the total number of shares of all classes of capital stock that the Company shall have the authority to issue at six billion (6,000,000,000) shares of common stock, par value $0.01 per share, and thirty million (30,000,000) shares of preferred stock, par value $1.00 per share.
2. The Certificate of Incorporation expressly grants to the Board of Directors of the Company (the “Board of Directors”) authority to provide for the issuance of the shares of preferred stock in series, and to establish from time to time the number of shares to be included in each such series and to fix the designation, powers, preferences and rights of the shares of each such series and the qualifications, limitations or restrictions thereof.
3. Pursuant to the authority conferred upon a pricing committee (the “Pricing Committee”) by the Board of Directors, the Pricing Committee, by action duly taken on April 23, 2013, adopted resolutions (i) authorizing the issuance and sale of up to 50,000 shares of the Company’s preferred stock and (ii) approving this final form of Certificate of Designations of
5.350% Fixed Rate / Floating Rate Noncumulative Preferred Stock, Series D (the “Series D Preferred Stock”) establishing the number of shares to be included in this Series D Preferred Stock and fixing the designation, powers, preferences and rights of the shares of this Series D Preferred Stock and the qualifications, limitations or restrictions thereof as follows:
Section 1. Designation.
The designation of the series of preferred stock shall be “5.350% Fixed Rate / Floating Rate Noncumulative Preferred Stock, Series D” (the “Series D Preferred Stock”). Each share of
Series D Preferred Stock shall be identical in all respects to every other share of Series D Preferred Stock.
Section 2. Number of Shares.
The number of authorized shares of Series D Preferred Stock shall be 50,000. That number from time to time may be increased (but not in excess of the total number of authorized shares of preferred stock) or decreased (but not below the number of shares of Series D Preferred Stock then outstanding) by further resolution duly adopted by the Board of Directors, the Pricing Committee or any other duly authorized committee thereof and by the filing of a certificate pursuant to the provisions of the General Corporation Law of the State of Delaware stating that such increase or reduction, as the case may be, has been so authorized. The Company shall have the authority to issue fractional shares of Series D Preferred Stock.
Section 3. Definitions. As used herein with respect to Series D Preferred Stock:
“Appropriate Federal Banking Agency” means the “appropriate federal banking agency” with respect to the Company as that term is defined in Section 3(q) of the Federal Deposit Insurance Act of 1950, as amended, or any successor provision.
“Board of Directors” has the meaning set forth in the recitals above.
“Business Day” means any weekday that is not a legal holiday in New York City and is not a day on which banking institutions in New York City are authorized or required by law or regulation to be closed.
“Calculation Agent” means the Transfer Agent acting in its capacity as calculation agent for the Series D Preferred Stock, and its successors and assigns.
“Common Stock” means the common stock of the Company, par value $0.01 per share, or any other shares of the capital stock of the Company into which such shares of common stock shall be reclassified or changed.
“Depositary” means DTC or its nominee or any successor depositary appointed by the Company.
“Dividend Payment Date” shall have the meaning set forth in Section 4(a) hereof.
“Dividend Period” shall have the meaning set forth in Section 4(a) hereof.
“Dividend Record Date” shall have the meaning set forth in Section 4(a) hereof.
“DTC” means The Depository Trust Company.
“Holder” means the Person in whose name the shares of the Series D Preferred Stock are registered, which may be treated by the Company, Calculation Agent, Transfer Agent, Registrar and paying agent as the absolute owner of the shares of Series D Preferred Stock for the purpose of making payment and for all other purposes.
“Junior Stock” means the Common Stock and any other class or series of stock of the Company now existing or hereafter authorized over which Series D Preferred Stock has
preference or priority in the payment of dividends or in the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the Company.
“LIBOR Determination Date” means the second London Banking Day immediately preceding the first day of the relevant Dividend Period.
“London Banking Day” means any day on which commercial banks are open for general business (including dealings in deposits in United States dollars) in London.
“Nonpayment” shall have the meaning set forth in Section 7(b)(i) hereof.
“Officer” means the Chief Executive Officer, the Chairman, the Chief Administrative Officer, any Vice Chairman, the Chief Financial Officer, the Controller, the Chief Accounting Officer, the Treasurer, any Deputy Treasurer, any Assistant Treasurer, any Vice President, the General Counsel and Corporate Secretary and any Assistant Secretary of the Company.
“Person” means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint-stock company, limited liability company, trust, or other entity.
“Preferred Stock Director” shall have the meaning set forth in Section 7(b)(i) hereof.
“Preferred Stock Director Termination Date” shall have the meaning set forth in Section 7(b)(iv) hereof.
“Registrar” means the Transfer Agent acting in its capacity as registrar for the Series D Preferred Stock, and its successors and assigns.
“Regulatory Capital Event” means the good faith determination by the Company that, as a result of (i) any amendment to, clarification of, or change in, the laws or regulations of the United States or any political subdivision of or in the United States that is enacted or becomes effective after the initial issuance of any share of the Series D Preferred Stock, (ii) any proposed change in those laws or regulations that is announced or becomes effective after the initial issuance of any share of the Series D Preferred Stock, or (iii) any official administrative decision or judicial decision or administrative action or other official pronouncement interpreting or applying those laws or regulations or policies with respect thereto that is announced after the initial issuance of any share of the Series D Preferred Stock, there is more than an insubstantial risk that the Company will not be entitled to treat the full liquidation preference amount of $25,000 per share of the Series D Preferred Stock then outstanding as “tier 1 capital” (or its equivalent) for purposes of the capital adequacy guidelines of the Federal Reserve (or, as and if applicable, the capital adequacy guidelines or regulations of any successor Appropriate Federal Banking Agency) as then in effect and applicable, for so long as any share of the Series D Preferred Stock is outstanding.
“Reuters LIBOR01” means the display designated on the Reuters 3000 Xtra Service on page LIBOR01 Page (or such other page as may replace “Reuters LIBOR01” page on the service or such other service as may be nominated by the British Bankers’ Association or other administrator of LIBOR for the purpose of displaying London interbank offered rates for United States dollar deposits or loans).
“Series D Preferred Stock” shall have the meaning set forth in Section 1 hereof.
“Series D Preferred Stock Certificate” shall have the meaning set forth in Section 14(a) hereof.
“Three-month LIBOR” means the rate (expressed as a percentage per annum) for deposits in United States dollars for a three-month period commencing on the first day of a Dividend Period that appears on the Reuters LIBOR01 page as of 11:00 a.m. (London time) on the LIBOR Determination Date for that Dividend Period. If such rate does not appear on the Reuters LIBOR01 page, Three-month LIBOR will be determined on the basis of the rates at which deposits in United States dollars for a three-month period commencing on the first day of that Dividend Period and in a principal amount of not less than $1 million are offered to prime banks in the London interbank market by four major banks in the London interbank market selected by the Calculation Agent (after consultation with the Company), at approximately 11:00 a.m., London time, on the LIBOR Determination Date for that Dividend Period. The Calculation Agent will request the principal London office of each of such banks to provide a quotation of its rate. If at least two such quotations are provided, Three-month LIBOR with respect to that Dividend Period will be the arithmetic mean (rounded upward if necessary to the nearest whole multiple of 0.00001%) of such quotations. If fewer than two quotations are provided, Three-month LIBOR with respect to that Dividend Period will be the arithmetic mean (rounded upward if necessary to the nearest whole multiple of 0.00001%) of the rates quoted by three major banks in New York City selected by the Calculation Agent (after consultation with the Company), at approximately 11:00 a.m., New York City time, on the LIBOR Determination Date for that Dividend Period for loans in United States dollars to leading European banks for a three-month period commencing on the first day of that Dividend Period and in a principal amount of not less than $1 million. However, if fewer than three banks selected by the Calculation Agent to provide quotations are quoting as described above, Three-month LIBOR for that Dividend Period will be the same Three-month LIBOR as determined for the previous Dividend Period or, in the case of the Dividend Period beginning on May 15, 2023, 0.2756%. The determination of Three-month LIBOR for each relevant Dividend Period by the Calculation Agent will (in the absence of manifest error) be final and binding.
“Transfer Agent” means Computershare Trust Company, N.A., a federally chartered national association, acting as Transfer Agent, Calculation Agent, Registrar and paying agent for the Series D Preferred Stock, and its successors and assigns.
“Trust” shall have the meaning set forth in Section 6(d).
Section 4. Dividends.
(a) Rate. Holders shall be entitled to receive, when, as and if declared by the Board of Directors or any duly authorized committee thereof, but only out of funds legally available therefor, noncumulative cash dividends on each share of Series D Preferred Stock in the amounts specified below in this Section 4, and no more, payable (i) semi-annually in arrears on each May 15 and November 15, beginning November 15, 2013, from and including the date of issuance to, but excluding, May 15, 2023, and (ii) quarterly in arrears on each February 15, May 15, August 15, and November 15, beginning August 15, 2023 from and including May 15, 2023; provided, however, if any such day is not a Business Day, then payment of any dividend otherwise payable
on that date will be made on the next succeeding day that is a Business Day (except if after May 15, 2023, that day falls in the next calendar month, in which case the payment of any dividend otherwise payable will be made on the first preceding Business Day), (i) on or prior to May 15, 2023, without any interest or other payment in respect of such postponement, and (ii) after May 15, 2023, with dividends accruing to the actual payment date (each such day on which dividends are payable a “Dividend Payment Date”). The period from and including the date of issuance of the Series D Preferred Stock or any Dividend Payment Date to, but excluding, the next Dividend Payment Date is a “Dividend Period.” Dividends on each share of Series D Preferred Stock will accrue on the liquidation preference of $25,000 per share at a rate per annum equal to (i) 5.350%, for each Dividend Period from and including the date of issuance to, but excluding, May 15, 2023 and (ii) Three-month LIBOR plus 3.466%, for each Dividend Period from and including May 15, 2023. The record date for payment of dividends on the Series D Preferred Stock will be the record date fixed by the Board of Directors or any other duly authorized committee thereof that is not more than 30 nor less than 10 days prior to such Dividend Payment Date (each, a “Dividend Record Date”). Any such day that is a Dividend Record Date will be a Dividend Record Date whether or not such day is a Business Day. The amount of dividends payable on or prior to May 15, 2023 will be computed on the basis of a 360-day year of twelve 30-day months. The amount of dividends payable after May 15, 2023 will be computed on the basis of a 360-day year and the actual number of days elapsed.
(b) Noncumulative Dividends. If the Board of Directors or any duly authorized committee thereof does not declare a dividend on the Series D Preferred Stock for any Dividend Period prior to the related Dividend Payment Date, that dividend will not accrue, and the Company will have no obligation to pay, and Holders shall have no right to receive, a dividend for that Dividend Period on the related Dividend Payment Date or at any future time, whether or not dividends on the Series D Preferred Stock or any other series of preferred stock or common stock are declared for any subsequent period. References herein to the “accrual” of dividends refer only to the determination of the amount of such dividend and do not imply that any right to a dividend arises prior to the date on which a dividend is declared.
(c) Priority of Dividends. So long as any share of Series D Preferred Stock remains outstanding, unless as to a Dividend Payment Date full dividends on all outstanding shares of the Series D Preferred Stock have been declared and paid or declared and a sum sufficient for the payment of those dividends has been set aside for the Dividend Period then ending, the Company will not, and will cause its subsidiaries not to, during the next succeeding Dividend Period that commences on such Dividend Payment Date, declare or pay any dividend on, make any distributions relating to, or redeem, purchase, acquire or make a liquidation payment relating to, any Junior Stock, or make any guarantee payment with respect thereto, other than:
(i) purchases, redemptions or other acquisitions of shares of Junior Stock in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of employees, officers, directors or consultants;
(ii) purchases of shares of Common Stock pursuant to a contractually binding requirement to buy stock existing prior to the commencement of the then-current Dividend Period, including under a contractually binding stock repurchase plan;
(iii) as a result of an exchange or conversion of any class or series of Junior Stock for any other class or series of Junior Stock;
(iv) the purchase of fractional interests in shares of Junior Stock pursuant to the conversion or exchange provisions of such Junior Stock or the security being converted or exchanged;
(v) the purchase of Junior Stock by an investment banking subsidiary of the Company in connection with the distribution thereof; or
(vi) the purchase of Junior Stock by any investment banking subsidiary of the Company in connection with market-making or other secondary market activities in the ordinary course of the business of such subsidiary.
The restrictions set forth in the preceding provisions of this Section 4(c) shall not apply to any Junior Stock dividends paid by the Company where the dividend is in the form of the same stock (or the right to buy the same stock) as that on which the dividend is being paid.
Except as provided below, for so long as any share of Series D Preferred Stock remains outstanding, if dividends are not declared and paid in full upon the shares of Series D Preferred Stock and any class or series of stock of the Company now existing or hereafter authorized that ranks equally with the Series D Preferred Stock in the payment of dividends, all dividends declared upon shares of Series D Preferred Stock and such other stock will be declared on a proportional basis so that the amount of dividends declared per share will bear to each other the same ratio that accrued dividends for the then-current Dividend Period per share of Series D Preferred Stock and accrued dividends for the then-current Dividend Period per share of such other stock (including, in the case of any such other stock that bears cumulative dividends, all accrued and unpaid dividends) bear to each other.
Subject to the foregoing, and not otherwise, such dividends payable in cash, stock or otherwise, as may be determined by the Board of Directors or any duly authorized committee thereof, may be declared and paid on any other class or series of stock of the Company from time to time out of any funds legally available for such payment, and Holders will not be entitled to participate in those dividends.
Section 5. Liquidation Rights.
(a) Liquidation. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company, Holders shall be entitled, out of funds legally available therefor, before any distribution or payment may be made by the Company or set aside for the holders of any Junior Stock and subject to the rights of the holders of any class or series of stock
ranking senior to or on parity with Series D Preferred Stock upon liquidation and the rights of the Company’s depositors and other creditors, to receive in full a liquidating distribution in the amount of the liquidation preference of $25,000 per share, plus any accrued dividends thereon from the last Dividend Payment Date to, but excluding, the date of the liquidation, dissolution or winding up if and to the extent declared but not yet paid. Holders shall not be entitled to any further payments in the event of any such voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company other than what is expressly provided for in this Section 5.
(b) Partial Payment. If the assets of the Company are not sufficient to pay in full the aforesaid liquidation distributions to the Holders and any liquidation distributions owed to holders of any class or series of stock of the Company ranking equally with the Series D Preferred Stock in the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the Company, the amounts paid to the Holders and to the holders of all such equally ranking stock shall be pro rata in accordance with the respective aggregate liquidating distributions to which they would otherwise be entitled.
(c) Merger, Consolidation and Sale of Assets Not Liquidation. For purposes of this Section 5, the sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the property and assets of the Company shall not be deemed a voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, nor shall the merger, consolidation or any other business combination transaction of the Company into or with any other corporation or Person or the merger, consolidation or any other business combination transaction of any other corporation or Person into or with the Company be deemed to be a voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company.
Section 6. Redemption.
(a) Optional Redemption. The Company, at the option of its Board of Directors or any duly authorized committee thereof, may redeem out of funds legally available therefor, (i) in whole or in part, from time to time, the shares of Series D Preferred Stock at the time outstanding, on any Dividend Payment Date on or after May 15, 2023, or (ii) in whole but not in part at any time within 90 days following a Regulatory Capital Event, in each case at a redemption price equal to $25,000 per share plus any declared and unpaid dividends, without accumulation of any undeclared dividends, to but excluding the redemption date, upon notice given as provided in Section 6(b) below.
(b) Notice of Redemption. Notice of every redemption of shares of Series D Preferred Stock shall be mailed by first class mail, postage prepaid, addressed to the Holders of such shares to be redeemed at their respective last addresses appearing on the stock register of the Company. Such mailing shall be at least 30 days and not more than 60 days before the date fixed for redemption. Any notice mailed as provided in this Section 6(b) shall be conclusively presumed to have been duly given, whether or not the Holder receives such notice, but failure duly to give such notice by mail, or any defect in such notice or in the mailing thereof, to any Holder of
shares of Series D Preferred Stock designated for redemption shall not affect the validity of the proceedings for the redemption of any other shares of Series D Preferred Stock. Each notice shall state:
(i) the redemption date;
(ii) the total number of shares of Series D Preferred Stock to be redeemed and, if fewer than all the shares of a Holder are to be redeemed, the number of such shares to be redeemed;
(iii) the redemption price;
(iv) the place or places where the certificates for such shares are to be surrendered for payment of the redemption price, if applicable; and
(v) that dividends on the shares to be redeemed will cease to accrue on the redemption date.
Notwithstanding the foregoing, if the certificates evidencing the shares of Series D Preferred Stock are held of record by a depositary and any related depository shares are held of record by a Depositary or its nominee, the Company may give such notice in any manner permitted by the Depositary.
(c) Partial Redemption. In case of any redemption of only part of the shares of Series D Preferred Stock at the time outstanding, the shares of Series D Preferred Stock to be redeemed shall be selected pro rata from the Holders in proportion to the number of shares of Series D Preferred Stock held by such Holders, by lot or in such other manner as the Board of Directors or any duly authorized committee thereof may determine, in its sole discretion, to be fair and equitable. Subject to the provisions of this Section 6, the Board of Directors or any duly authorized committee thereof shall have full power and authority to prescribe the terms and conditions upon which shares of Series D Preferred Stock shall be redeemed from time to time.
(d) Effectiveness of Redemption. If notice of redemption has been duly given and if on or before the redemption date specified in the notice all funds necessary for the redemption have been set aside by the Company, separate and apart from its other assets, for the pro rata benefit of the Holders of the shares called for redemption, so as to be and continue to be available therefor, or deposited by the Company with a bank or trust company selected by the Board of Directors or any duly authorized committee thereof (the “Trust”) in trust for the pro rata benefit of the Holders of the shares called for redemption, then, notwithstanding that any certificate for any share so called for redemption has not been surrendered for cancellation, on and after the redemption date all shares so called for redemption shall cease to be outstanding, all dividends with respect to such shares shall cease to accrue on such redemption date, and all rights with respect to such shares shall forthwith on such redemption date cease and terminate, except only the right of the Holders thereof to receive the amount payable on such redemption from the Trust at any time after the redemption date from the funds so deposited, without interest. The
Company shall be entitled to receive, from time to time, from the Trust any interest accrued on such funds, and the Holders of any shares called for redemption shall have no claim to any such interest. Any funds so deposited and unclaimed at the end of three years from the redemption date shall, to the extent permitted by law, be released or repaid to the Company, and in the event of such repayment to the Company, the Holders of the shares so called for redemption shall be deemed to be unsecured creditors of the Company for an amount equivalent to the amount deposited as stated above for the redemption of such shares and so repaid to the Company, but shall in no event be entitled to any interest.
Section 7. Voting Rights.
(a) General. The Holders shall not be entitled to vote on any matter except as set forth in Section 7(b) below or as required by the Delaware General Corporation Law.
(b) Special Voting Right.
(i) Voting Right. If and whenever dividends on the Series D Preferred Stock or any other class or series of preferred stock that ranks on parity with Series D Preferred Stock as to payment of dividends and upon which voting rights equivalent to those granted by this Section 7(b)(i) have been conferred and are exercisable (any such class or series being referred to herein as “dividend parity stock”) have not been paid in an aggregate amount equal, as to any class or series, to at least three semi-annual or six quarterly Dividend Periods, as applicable, (whether consecutive or not) (a “Nonpayment”), the authorized number of directors constituting the Board of Directors shall be increased by two, and the Holders, together with holders of dividend parity stock, shall have the right, voting separately as a single class without regard to class or series (and with voting rights allocated pro rata based on the liquidation preference of each such class or series), to the exclusion of the holders of Common Stock, to elect two directors of the Company to fill such newly created directorships (and to fill any vacancies in the terms of such directorships), provided that it shall be a qualification for election of any such director that the election of such director shall not cause the Company to violate the corporate governance requirements of the New York Stock Exchange (or other exchange on which the Company’s securities may be listed) that listed companies must have a majority of independent directors and further provided that the Board of Directors shall at no time include more than two such directors. Each such director elected by the Holders together with holders of dividend parity stock is a “Preferred Stock Director.”
(ii) Election. The election of the Preferred Stock Directors will take place at any annual meeting of stockholders or any special meeting of the Holders and any dividend parity stock, called as provided herein. At any time after the special voting power has vested pursuant to Section 7(b)(i) above, the secretary of the Company may, and upon the written request (addressed to the secretary at the Company’s principal office) of the holders of at least 20% of the voting power of the Series D Preferred Stock or the holders
of at least 20% of the voting power of any series of dividend parity stock (with such voting power measured based on the voting power to elect Preferred Stock Directors), must (unless such request is received less than 90 days before the date fixed for the next annual or special meeting of the stockholders at which Preferred Stock Directors are to be elected, in which event such election shall be held at such next annual or special meeting of stockholders), call a special meeting of the holders of Series D Preferred Stock and any dividend parity stock for the purposes of electing Preferred Stock Directors. The Preferred Stock Directors shall each be entitled to one vote per director on any matter.
(iii) Notice of Special Meeting. Notice for a special meeting to elect Preferred Stock Directors will be given in a similar manner to that provided in the Company’s by-laws for a special meeting of the stockholders. If the secretary of the Company does not call a special meeting within 20 days after receipt of any such request, then any Holder may (at the expense of the Company) call such meeting, upon notice as provided in this Section 7(b)(iii), and for that purpose will have access to the stock register of the Company. The Preferred Stock Directors elected at any such special meeting and each Preferred Stock Director elected at a subsequent annual or special meeting of stockholders, will be elected for term expiring upon the earlier of the Preferred Stock Director Termination Date and the next annual meeting of stockholders following such Preferred Stock Director's election. In case any vacancy in the office of a Preferred Stock Director occurs (other than prior to the initial election of the Preferred Stock Directors), the vacancy may be filled by the Preferred Stock Director remaining in office, or if none remains in office, by a plurality of the votes cast by the holders of Series D Preferred Stock and any dividend parity stock, voting together as a single class, and the Preferred Stock Director so appointed or elected to fill such vacancy shall serve for a term expiring at the next annual meeting of the stockholders. Preferred Stock Directors may only be elected by the holders of Series D Preferred Stock and dividend parity stock in accordance with this Section 7. If the holders of Series D Preferred Stock and such dividend parity stock fail to elect a sufficient number of directors to fill all directorships for which they are entitled to elect directors pursuant to this Section 7, then any directorship not so filled shall remain vacant until such time as the holders of Series D Preferred Stock and such dividend parity stock elect a person to fill such directorship in accordance with this Section 7, or such vacancy is otherwise filled in accordance with this Section 7; and no such directorship may be filled by stockholders of the Corporation other than in accordance with this Section 7.
(iv) Termination; Removal. Whenever the Company has paid noncumulative dividends in full for at least two consecutive semi-annual or four consecutive quarterly Dividend Periods following a Nonpayment on the Series D Preferred Stock and on any dividend parity stock entitled to noncumulative dividends and has paid cumulative dividends in full on any dividend parity stock entitled to cumulative dividends, then the right of the Holders to elect the Preferred Stock Directors will cease (but subject always to the same provisions for the vesting of the special voting rights in the case of any similar non-payment of dividends in respect of future Dividend Periods) (the time of such cessation, the “Preferred Stock Director Termination Date”). Upon a Preferred Stock
Director Termination Date, the terms of office of the Preferred Stock Directors will immediately terminate, the persons then serving as Preferred Stock Directors shall immediately cease to be qualified to hold office as Preferred Stock Directors, the Preferred Stock Directors shall cease to be directors of the Company and the number of directors constituting the Board of Directors shall be automatically reduced, without any action by the Board of Directors or the stockholders of the Company, by the number of Preferred Stock Directors authorized immediately prior to such termination. Any Preferred Stock Director may be removed at any time without cause by the holders of a majority of the voting power of outstanding shares of the capital stock then entitled to vote in the election of Preferred Stock Directors, voting together as a single class (with such voting power measured based on the voting power to elect Preferred Stock Directors).
(c) Senior Issuances; Adverse Changes. So long as any shares of Series D Preferred Stock are outstanding, but subject to the final paragraph of this Section 7(c), in addition to any other vote or consent of holders of the Company’s capital stock required by Delaware law, the vote or consent of the holders of at least two-thirds of the voting power of the Series D Preferred Stock and the holders of any other preferred stock entitled to vote thereon, voting together as a single class, given in person or by proxy at an annual or special meeting of stockholders, or given in writing without a meeting, will be necessary for effecting or validating any of the following actions, whether or not such approval is required by Delaware law:
(i) any amendment, alteration or repeal of any provision of the Company’s certificate of incorporation (including the certificate of designations creating the Series D Preferred Stock) or the Company’s by-laws that would alter or change the voting powers, preferences, economic rights or special rights of the Series D Preferred Stock so as to affect them adversely;
(ii) any amendment or alteration of the Company’s certificate of incorporation to authorize or create, or increase the authorized amount of, any shares of, or any securities convertible into shares of, any class or series of the Company's capital stock ranking prior to the Series D Preferred Stock in the payment of dividends or in the distribution of assets on any liquidation, dissolution, or winding up of the Company; or
(iii) the consummation of a binding share exchange or reclassification involving the Series D Preferred Stock or a merger or consolidation of the Company with another entity, except that holders of Series D Preferred Stock will have no right to vote under this provision or otherwise under Delaware law if in each case (i) the Series D Preferred Stock remains outstanding or, in the case of any such merger or consolidation with respect to which the Company is not the surviving or resulting entity, is converted into or exchanged for preferred securities of the surviving or resulting entity or its ultimate parent, that is an entity organized and existing under the laws of the United States of America, any state thereof or the District of Columbia and that is a corporation for U.S. federal income tax purposes (or if such entity is not a corporation, the Company having received an opinion of nationally recognized counsel experienced in such matters to the
effect that Holders will be subject to tax for U.S. federal income tax purposes with respect to such new preferred securities after such merger or consolidation in the same amount, at the same time and otherwise in the same manner as would have been the case under the Series D Preferred Stock prior to such merger or consolidation), and (ii) such Series D Preferred Stock remaining outstanding or such preferred securities, as the case may be, have such rights, preferences, privileges and voting powers, taken as a whole, as are not materially less favorable to the holders thereof than the rights, preferences, privileges and voting powers of the Series D Preferred Stock, taken as a whole;
provided, however, that, for the avoidance of doubt, any increase in the amount of the authorized or issued Series D Preferred Stock or authorized preferred stock or any securities convertible into preferred stock or the creation and issuance, or an increase in the authorized or issued amount, of other series of preferred stock or any securities convertible into preferred stock ranking equally with and/or junior to the Series D Preferred Stock with respect to the payment of dividends (whether such dividends are cumulative or noncumulative) and/or the distribution of assets upon the Company’s liquidation, dissolution or winding up will not be deemed to adversely affect the voting powers, preferences or special rights of the Series D Preferred Stock, and no stockholder will have the right to vote on such an increase, creation or issuance by reason of this Section 7.
If any amendment, alteration, repeal, share exchange, reclassification, merger or consolidation specified in this Section 7(c) would adversely affect the Series D Preferred Stock but not all series of preferred stock of the Company, then only such series of preferred stock as are adversely affected by and entitled to vote on the matter shall vote on the matter together with the Series D Preferred Stock as a single class (in lieu of all other series of preferred stock) for purposes of the vote or consent required by this Section 7(c).
(d) No Vote if Redemption. No vote or consent of the Holders shall be required pursuant to Section 7(b) or 7(c) if, at or prior to the time when the act with respect to such vote or consent would otherwise be required shall be effected, the Company shall have redeemed or shall have called for redemption all outstanding shares of Series D Preferred Stock, with proper notice and sufficient funds having been set aside for such redemption, in each case pursuant to Section 6 above.
Section 8. Preemption and Conversion Rights.
The Holders shall not have any preemptive rights or conversion rights as a result of the terms hereof.
Section 9. Rank.
For the avoidance of doubt, the Board of Directors or any duly authorized committee thereof may, without the vote of the Holders, authorize and issue additional shares of Junior Stock or shares of any class or series of stock of the Company now existing or hereafter authorized that ranks equally with the Series D Preferred Stock in the payment of dividends or in
the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the Company.
Section 10. Reacquired Shares.
The Board of Directors shall take such actions as are necessary to cause the shares of Series D Preferred Stock which have been redeemed or otherwise purchased or acquired by the Company to be retired and restored to the status of authorized but unissued shares of preferred stock without designation as to series.
Section 11. No Sinking Fund.
Shares of Series D Preferred Stock are not subject to the operation of a sinking fund.
Section 12. Transfer Agent, Calculation Agent, Registrar and Paying Agent.
The duly appointed Transfer Agent, Calculation Agent, Registrar and paying agent for the Series D Preferred Stock shall be Computershare Trust Company, N.A. The Company may, in its sole discretion, remove the Transfer Agent in accordance with the agreement between the Company and the Transfer Agent; provided, however, that the Company shall appoint a successor transfer agent who shall accept such appointment prior to the effectiveness of such removal. Upon any such removal or appointment, the Company shall send notice thereof by first-class mail, postage prepaid, to the Holders.
Section 13. Replacement Certificates for Mutilated, Destroyed, Stolen and Lost Certificates.
If physical certificates are issued, the Company shall replace any mutilated certificate at the Holder’s expense upon surrender of that certificate to the Transfer Agent. The Company shall replace certificates that become destroyed, stolen or lost at the Holder’s expense upon delivery to the Company and the Transfer Agent of satisfactory evidence that the certificate has been destroyed, stolen or lost, together with any indemnity that may be required by the Transfer Agent and the Company.
Section 14. Form.
(a) Series D Preferred Stock Certificates. Series D Preferred Stock shall be issued in certificated form in substantially the form attached hereto as Exhibit A (each, a “Series D Preferred Stock Certificate”). Exhibit A is hereby incorporated in and expressly made a part of this Certificate of Designations. The Series D Preferred Stock Certificates may have notations, legends or endorsements required by law, stock exchange rules, agreements to which the
Company is subject, if any, or usage (provided that any such notation, legend or endorsement is in a form acceptable to the Company).
(b) Signature. Two Officers shall sign any Series D Preferred Stock Certificate for the Company, in accordance with the Company’s by-laws and applicable law, by manual or facsimile signature. If an Officer whose signature is on a Series D Preferred Stock Certificate no longer holds that office at the time the Transfer Agent countersigned the Series D Preferred Stock Certificate, such Series D Preferred Stock Certificate shall be valid nevertheless. A Series D Preferred Stock Certificate shall not be valid until an authorized signatory of the Transfer Agent manually countersigns such Series D Preferred Stock Certificate. Each Series D Preferred Stock Certificate shall be dated the date of its countersignature.
Section 15. Taxes.
(a) Transfer Taxes. The Company shall pay any and all stock transfer, documentary, stamp and similar taxes that may be payable in respect of any issuance or delivery of shares of Series D Preferred Stock. The Company shall not, however, be required to pay any such tax that may be payable in respect of any transfer involved in the issuance or delivery of shares of Series D Preferred Stock, in a name other than that in which the shares of Series D Preferred Stock were registered, or in respect of any payment to any Person other than a payment to the registered holder thereof, and shall not be required to make any such issuance, delivery or payment unless and until the Person otherwise entitled to such issuance, delivery or payment has paid to the Company the amount of any such tax or has established, to the satisfaction of the Company, that such tax has been paid or is not payable.
(b) Withholding. All payments and distributions (or deemed distributions) on the shares of Series D Preferred Stock shall be subject to withholding and backup withholding of tax to the extent required by law, subject to applicable exemptions, and amounts withheld, if any, shall be treated as received by Holders.
Section 16. Notices.
All notices referred to herein shall be in writing, and, unless otherwise specified herein, all notices hereunder shall be deemed to have been given upon the earlier of receipt thereof or three Business Days after the mailing thereof if sent by registered or certified mail (unless first class mail shall be specifically permitted for such notice under the terms of this Certificate of Designations) with postage prepaid, addressed: (i) if to the Company, to its office at 399 Park Avenue, New York, New York 10043 (Attention: Corporate Secretary) or to the Transfer Agent at its office at 250 Royall Street, Canton, Massachusetts 02021, or other agent of the Company designated as permitted by this Certificate of Designations, or (ii) if to any Holder, to such Holder at the address of such Holder as listed in the stock record books of the Company (which may include the records of the Transfer Agent) or (iii) to such other address as the Company or any such Holder, as the case may be, shall have designated by notice similarly given.
Section 17. Other Rights Disclaimed.
The shares of Series D Preferred Stock have no voting powers, preferences or relative, participating, optional or other special rights, or qualifications, limitations or restrictions thereof, other than as set forth herein or in the Certificate of Incorporation of the Company.
IN WITNESS WHEREOF, this Certificate of Designations as has been executed on behalf of the Company by its Chief Financial Officer this 29th day of April, 2013.
CITIGROUP INC.
By: _/s/ John C. Gerspach__________________ Name: John C. Gerspach Title: Chief Financial Officer
Exhibit A
FORM OF 5.350% FIXED RATE / FLOATING RATE NONCUMULATIVE PREFERRED STOCK, SERIES D
Certificate Number_______ Number of Shares of Series D Preferred Stock______
CUSIP NO.:
CITIGROUP INC.
5.350% Fixed Rate / Floating Rate Noncumulative Preferred Stock, Series D
(par value $1.00 per share) (liquidation preference $25,000 per share)
Citigroup Inc., a Delaware corporation (the “Company”), hereby certifies that [ ] (the “Holder”) is the registered owner of [ ] fully paid and non-assessable shares of the Company’s designated 5.350% Fixed Rate / Floating Rate Noncumulative Preferred Stock, Series D, with a par value of $1.00 per share and a liquidation preference of $25,000 per share (the “Series D Preferred Stock”). The shares of Series D Preferred Stock are transferable on the books and records of the Registrar, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer. The designations, rights, privileges, restrictions, preferences and other terms and provisions of the Series D Preferred Stock represented hereby are and shall in all respects be subject to the provisions of the Certificate of Designations dated April 29, 2013 as the same may be amended from time to time (the “Certificate of Designations”). Capitalized terms used herein but not defined shall have the meaning given them in the Certificate of Designations. The Company will provide a copy of the Certificate of Designations to a Holder without charge upon written request to the Company at its principal place of business.
Reference is hereby made to select provisions of the Series D Preferred Stock set forth on the reverse hereof, and to the Certificate of Designations, which select provisions and the Certificate of Designations shall for all purposes have the same effect as if set forth at this place.
Upon receipt of this certificate, the Holder is bound by the Certificate of Designations and is entitled to the benefits thereunder.
Unless the Registrar has properly countersigned, these shares of Series D Preferred Stock shall not be entitled to any benefit under the Certificate of Designations or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, this certificate has been executed on behalf of the Company by its [Title] and by its [Title] this __ day of ________, ________.
CITIGROUP INC.
By: _______________________________________ Name: Title:
By: _______________________________________ Name: Title:
REGISTRAR’S COUNTERSIGNATURE
These are shares of Series D Preferred Stock referred to in the within-mentioned Certificate of Designations.
Dated:
COMPUTERSHARE TRUST COMPANY, N.A., as Registrar
By: _______________________________________ Name: Title:
REVERSE OF CERTIFICATE
Dividends on each share of Series D Preferred Stock shall be payable at the rate provided in the Certificate of Designations.
The shares of Series D Preferred Stock shall be redeemable at the option of the Company in the manner and in accordance with the terms set forth in the Certificate of Designations.
The Company shall furnish without charge to each holder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class or series of share capital issued by the Company and the qualifications, limitations or restrictions of such preferences and/or rights.
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers the shares of Series D Preferred Stock evidenced hereby to:
___________________________________________________
___________________________________________________
(Insert assignee’s social security or taxpayer identification number, if any)
___________________________________________________
___________________________________________________
(Insert address and zip code of assignee)
and irrevocably appoints:
___________________________________________________
___________________________________________________
as agent to transfer the shares of Series D Preferred Stock evidenced hereby on the books of the Transfer Agent. The agent may substitute another to act for him or her.
Date:
Signature:
___________________________________________________
(Sign exactly as your name appears on the other side of this Certificate)
Signature Guarantee: ___________________________________________________
(Signature must be guaranteed by an “eligible guarantor institution” that is a bank, stockbroker, savings and loan association or credit union meeting the requirements of the Transfer Agent, which requirements include membership or participation in the Securities Transfer Agents Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Transfer Agent in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.)
CERTIFICATE OF RETIREMENT
OF PREFERRED STOCK
OF CITIGROUP INC.
(Pursuant to Section 243 of the General
Corporation Law of the State of Delaware)
CITIGROUP INC., a corporation duly organized and existing under the General Corporation Law of the State of Delaware, certifies as follows:
FIRST: Citigroup's Restated Certificate of Incorporation, as amended (the "Certificate of Incorporation"), authorizes the issuance of 92,000 shares of 8.50% Non-Ccumulative Preferred Stock, Series F (the "Preferred Stock, Series F"), each such share with $1.00 par value and a stated value of $25,000 per share.
SECOND: Citigroup has retired all of the authorized shares of the Preferred Stock, Series F.
THIRD: Pursuant to the provisions of Section 243 of the General Corporation Law of the State of Delaware, the shares that were designated to Preferred Stock, Series F are hereby returned to the status of authorized but unissued shares of the Preferred Stock of Citigroup.
IN WITNESS WHEREOF, CITIGROUP INC. has caused this certificate to be signed by the below duly authorized Assistant Treasurer this 1st day of July, 2013.
CITIGROUP INC.
By: /s/ Martin A. Waters
Martin A. Waters
Assistant Treasurer
CERTIFICATE OF RETIREMENT
OF PREFERRED STOCK
OF CITIGROUP INC.
(Pursuant to Section 243 of the General
Corporation Law of the State of Delaware)
CITIGROUP INC., a corporation duly organized and existing under the General Corporation Law of the State of Delaware, certifies as follows:
FIRST: Citigroup's Restated Certificate of Incorporation, as amended (the "Certificate of Incorporation"), authorizes the issuance of 66,700 shares of 6.5% Non-Cumulative Convertible Preferred Stock, Series T (the "Preferred Stock, Series T"), each such share with $1.00 par value and a stated value of $25,000 per share.
SECOND: Citigroup has retired all of the authorized shares of the Preferred Stock, Series T.
THIRD: Pursuant to the provisions of Section 243 of the General Corporation Law of the State of Delaware, the shares that were designated to Preferred Stock, Series T are hereby returned to the status of authorized but unissued shares of the Preferred Stock of Citigroup.
IN WITNESS WHEREOF, CITIGROUP INC. has caused this certificate to be signed by the below duly authorized Assistant Treasurer this 1st day of July, 2013.
CITIGROUP INC.
By: /s/ Martin A. Waters
Martin A. Waters
Assistant Treasurer
CERTIFICATE OF DESIGNATIONS
OF
7.125% FIXED RATE / FLOATING RATE NONCUMULATIVE PREFERRED STOCK SERIES J
OF
CITIGROUP INC.
______________________________
pursuant to Section 151 of the
General Corporation Law of the State of Delaware
______________________________
Citigroup Inc., a Delaware corporation (the “Company”), hereby certifies that:
1. The Restated Certificate of Incorporation of the Company (as amended through the date hereof, the “Certificate of Incorporation”) fixes the total number of shares of all classes of capital stock that the Company shall have the authority to issue at six billion (6,000,000,000) shares of common stock, par value $0.01 per share, and thirty million (30,000,000) shares of preferred stock, par value $1.00 per share.
2. The Certificate of Incorporation expressly grants to the Board of Directors of the Company (the “Board of Directors”) authority to provide for the issuance of the shares of preferred stock in series, and to establish from time to time the number of shares to be included in each such series and to fix the designation, powers, preferences and rights of the shares of each such series and the qualifications, limitations or restrictions thereof.
3. Pursuant to the authority conferred upon a pricing committee (the “Pricing Committee”) by the Board of Directors, the Pricing Committee, by action duly taken on September 12, 2013, adopted resolutions (i) authorizing the issuance and sale of up to 41,400 shares of the Company’s preferred stock and (ii) approving this final form of Certificate of Designations of 7.125% Fixed Rate / Floating Rate Noncumulative Preferred Stock, Series J (the “Series J Preferred Stock”) establishing the number of shares to be included in this Series J Preferred Stock and fixing the designation, powers, preferences and rights of the shares of this Series J Preferred Stock and the qualifications, limitations or restrictions thereof as follows:
Section 1. Designation.
The designation of the series of preferred stock shall be “7.125% Fixed Rate / Floating Rate Noncumulative Preferred Stock, Series J” (the “Series J Preferred Stock”). Each share of
Series J Preferred Stock shall be identical in all respects to every other share of Series J Preferred Stock.
Section 2. Number of Shares.
The number of authorized shares of Series J Preferred Stock shall be 41,400. That number from time to time may be increased (but not in excess of the total number of authorized shares of preferred stock) or decreased (but not below the number of shares of Series J Preferred Stock then outstanding) by further resolution duly adopted by the Board of Directors, the Pricing Committee or any other duly authorized committee thereof and by the filing of a certificate pursuant to the provisions of the General Corporation Law of the State of Delaware stating that such increase or reduction, as the case may be, has been so authorized. The Company shall have the authority to issue fractional shares of Series J Preferred Stock.
Section 3. Definitions. As used herein with respect to Series J Preferred Stock:
“Appropriate Federal Banking Agency” means the “appropriate federal banking agency” with respect to the Company as that term is defined in Section 3(q) of the Federal Deposit Insurance Act of 1950, as amended, or any successor provision.
“Board of Directors” has the meaning set forth in the recitals above.
“Business Day” means any weekday that is not a legal holiday in New York City and is not a day on which banking institutions in New York City are authorized or required by law or regulation to be closed.
“Calculation Agent” means the Transfer Agent acting in its capacity as calculation agent for the Series J Preferred Stock, and its successors and assigns.
“Common Stock” means the common stock of the Company, par value $0.01 per share, or any other shares of the capital stock of the Company into which such shares of common stock shall be reclassified or changed.
“Depositary” means DTC or its nominee or any successor depositary appointed by the Company.
“Dividend Payment Date” shall have the meaning set forth in Section 4(a) hereof.
“Dividend Period” shall have the meaning set forth in Section 4(a) hereof.
“Dividend Record Date” shall have the meaning set forth in Section 4(a) hereof.
“DTC” means The Depository Trust Company.
“Holder” means the Person in whose name the shares of the Series J Preferred Stock are registered, which may be treated by the Company, Calculation Agent, Transfer Agent, Registrar and paying agent as the absolute owner of the shares of Series J Preferred Stock for the purpose of making payment and for all other purposes.
“Junior Stock” means the Common Stock and any other class or series of stock of the
Company now existing or hereafter authorized over which Series J Preferred Stock has
preference or priority in the payment of dividends or in the distribution of assets on any
voluntary or involuntary liquidation, dissolution or winding up of the Company.
“LIBOR Determination Date” means the second London Banking Day immediately preceding the first day of the relevant Dividend Period.
“London Banking Day” means any day on which commercial banks are open for general business (including dealings in deposits in United States dollars) in London.
“Nonpayment” shall have the meaning set forth in Section 7(b)(i) hereof.
“Officer” means the Chief Executive Officer, the Chairman, the Chief Administrative Officer, any Vice Chairman, the Chief Financial Officer, the Controller, the Chief Accounting Officer, the Treasurer, any Deputy Treasurer, any Assistant Treasurer, any Vice President, the General Counsel and Corporate Secretary and any Assistant Secretary of the Company.
“Person” means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint-stock company, limited liability company, trust, or other entity.
“Preferred Stock Director” shall have the meaning set forth in Section 7(b)(i) hereof.
“Preferred Stock Director Termination Date” shall have the meaning set forth in Section 7(b)(iv) hereof.
“Registrar” means the Transfer Agent acting in its capacity as registrar for the Series J Preferred Stock, and its successors and assigns.
“Regulatory Capital Event” means the good faith determination by the Company that, as a result of (i) any amendment to, clarification of, or change in, the laws or regulations of the United States or any political subdivision of or in the United States that is enacted or becomes effective after the initial issuance of any share of the Series J Preferred Stock, (ii) any proposed change in those laws or regulations that is announced or becomes effective after the initial issuance of any share of the Series J Preferred Stock, or (iii) any official administrative decision or judicial decision or administrative action or other official pronouncement interpreting or applying those laws or regulations or policies with respect thereto that is announced after the initial issuance of any share of the Series J Preferred Stock, there is more than an insubstantial risk that the Company will not be entitled to treat the full liquidation preference amount of $25,000 per share of the Series J Preferred Stock then outstanding as “tier 1 capital” (or its equivalent) for purposes of the capital adequacy guidelines of the Federal Reserve (or, as and if applicable, the capital adequacy guidelines or regulations of any successor Appropriate Federal Banking Agency) as then in effect and applicable, for so long as any share of the Series J Preferred Stock is outstanding.
“Reuters LIBOR01” means the display designated on the Reuters 3000 Xtra Service on page LIBOR01 Page (or such other page as may replace “Reuters LIBOR01” page on the service or such other service as may be nominated by the British Bankers’ Association or other administrator of LIBOR for the purpose of displaying London interbank offered rates for United States dollar deposits or loans).
“Series J Preferred Stock” shall have the meaning set forth in Section 1 hereof.
“Series J Preferred Stock Certificate” shall have the meaning set forth in Section 14(a) hereof.
“Three-month LIBOR” means the rate (expressed as a percentage per annum) for deposits in United States dollars for a three-month period commencing on the first day of a Dividend Period that appears on the Reuters LIBOR01 page as of 11:00 a.m. (London time) on the LIBOR Determination Date for that Dividend Period. If such rate does not appear on the Reuters LIBOR01 page, Three-month LIBOR will be determined on the basis of the rates at which deposits in United States dollars for a three-month period commencing on the first day of that Dividend Period and in a principal amount of not less than $1 million are offered to prime banks in the London interbank market by four major banks in the London interbank market selected by the Calculation Agent (after consultation with the Company), at approximately 11:00 a.m., London time, on the LIBOR Determination Date for that Dividend Period. The Calculation Agent will request the principal London office of each of such banks to provide a quotation of its rate. If at least two such quotations are provided, Three-month LIBOR with respect to that Dividend Period will be the arithmetic mean (rounded upward if necessary to the nearest whole multiple of 0.00001%) of such quotations. If fewer than two quotations are provided, Three-month LIBOR with respect to that Dividend Period will be the arithmetic mean (rounded upward if necessary to the nearest whole multiple of 0.00001%) of the rates quoted by three major banks in New York City selected by the Calculation Agent (after consultation with the Company), at approximately 11:00 a.m., New York City time, on the LIBOR Determination Date for that Dividend Period for loans in United States dollars to leading European banks for a three-month period commencing on the first day of that Dividend Period and in a principal amount of not less than $1 million. However, if fewer than three banks selected by the Calculation Agent to provide quotations are quoting as described above, Three-month LIBOR for that Dividend Period will be the same Three-month LIBOR as determined for the previous Dividend Period or, in the case of the Dividend Period beginning on September 30, 2023, 0.2544%. The determination of Three-month LIBOR for each relevant Dividend Period by the Calculation Agent will (in the absence of manifest error) be final and binding.
“Transfer Agent” means Computershare Trust Company, N.A., a federally chartered national association, acting as Transfer Agent, Calculation Agent, Registrar and paying agent for the Series J Preferred Stock, and its successors and assigns.
“Trust” shall have the meaning set forth in Section 6(d).
Section 4. Dividends.
(a) Rate. Holders shall be entitled to receive, when, as and if declared by the Board of Directors or any duly authorized committee thereof, but only out of funds legally available therefor, noncumulative cash dividends on each share of Series J Preferred Stock in the amounts specified below in this Section 4, and no more, payable quarterly in arrears on each March 30, June 30, September 30 and December 30, beginning December 30, 2013, from and including the date of issuance; provided, however, if any such day is not a Business Day, then payment of any
dividend otherwise payable on that date will be made on the next succeeding day that is a Business Day (except if after September 30, 2023, that day falls in the next calendar month, in which case the payment of any dividend otherwise payable will be made on the first preceding Business Day), (i) on or prior to September 30, 2023, without any interest or other payment in respect of such postponement, and (ii) after September 30, 2023, with dividends accruing to the actual payment date (each such day on which dividends are payable a “Dividend Payment Date”). The period from and including the date of issuance of the Series J Preferred Stock or any Dividend Payment Date to, but excluding, the next Dividend Payment Date is a “Dividend Period.” Dividends on each share of Series J Preferred Stock will accrue on the liquidation preference of $25,000 per share at a rate per annum equal to (i) 7.125%, for each Dividend Period from and including the date of issuance to, but excluding, September 30, 2023 and (ii) Three-month LIBOR plus 4.040%, for each Dividend Period from and including September 30, 2023. The record date for payment of dividends on the Series J Preferred Stock will be the record date fixed by the Board of Directors or any other duly authorized committee thereof that is not more than 30 nor less than 10 days prior to such Dividend Payment Date (each, a “Dividend Record Date”). Any such day that is a Dividend Record Date will be a Dividend Record Date whether or not such day is a Business Day. The amount of dividends payable on or prior to September 30, 2023 will be computed on the basis of a 360-day year of twelve 30-day months. The amount of dividends payable after September 30, 2023 will be computed on the basis of a 360-day year and the actual number of days elapsed.
(b) Noncumulative Dividends. If the Board of Directors or any duly authorized committee thereof does not declare a dividend on the Series J Preferred Stock for any Dividend Period prior to the related Dividend Payment Date, that dividend will not accrue, and the Company will have no obligation to pay, and Holders shall have no right to receive, a dividend for that Dividend Period on the related Dividend Payment Date or at any future time, whether or not dividends on the Series J Preferred Stock or any other series of preferred stock or common stock are declared for any subsequent period. References herein to the “accrual” of dividends refer only to the determination of the amount of such dividend and do not imply that any right to a dividend arises prior to the date on which a dividend is declared.
(c) Priority of Dividends. So long as any share of Series J Preferred Stock remains outstanding, unless as to a Dividend Payment Date full dividends on all outstanding shares of the Series J Preferred Stock have been declared and paid or declared and a sum sufficient for the payment of those dividends has been set aside for the Dividend Period then ending, the Company will not, and will cause its subsidiaries not to, during the next succeeding Dividend Period that commences on such Dividend Payment Date, declare or pay any dividend on, make any distributions relating to, or redeem, purchase, acquire or make a liquidation payment relating to, any Junior Stock, or make any guarantee payment with respect thereto, other than:
(i) purchases, redemptions or other acquisitions of shares of Junior Stock in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of employees, officers, directors or consultants;
(ii) purchases of shares of Common Stock pursuant to a contractually binding requirement to buy stock existing prior to the commencement of the then-current Dividend Period, including under a contractually binding stock repurchase plan;
(iii) as a result of an exchange or conversion of any class or series of Junior Stock for any other class or series of Junior Stock;
(iv) the purchase of fractional interests in shares of Junior Stock pursuant to the conversion or exchange provisions of such Junior Stock or the security being converted or exchanged;
(v) the purchase of Junior Stock by an investment banking subsidiary of the Company in connection with the distribution thereof; or
(vi) the purchase of Junior Stock by any investment banking subsidiary of the Company in connection with market-making or other secondary market activities in the ordinary course of the business of such subsidiary.
The restrictions set forth in the preceding provisions of this Section 4(c) shall not apply to any Junior Stock dividends paid by the Company where the dividend is in the form of the same stock (or the right to buy the same stock) as that on which the dividend is being paid.
Except as provided below, for so long as any share of Series J Preferred Stock remains outstanding, if dividends are not declared and paid in full upon the shares of Series J Preferred Stock and any class or series of stock of the Company now existing or hereafter authorized that ranks equally with the Series J Preferred Stock in the payment of dividends, all dividends declared upon shares of Series J Preferred Stock and such other stock will be declared on a proportional basis so that the amount of dividends declared per share will bear to each other the same ratio that accrued dividends for the then-current Dividend Period per share of Series J Preferred Stock and accrued dividends for the then-current Dividend Period per share of such other stock (including, in the case of any such other stock that bears cumulative dividends, all accrued and unpaid dividends) bear to each other.
Subject to the foregoing, and not otherwise, such dividends payable in cash, stock or otherwise, as may be determined by the Board of Directors or any duly authorized committee thereof, may be declared and paid on any other class or series of stock of the Company from time to time out of any funds legally available for such payment, and Holders will not be entitled to participate in those dividends.
Section 5. Liquidation Rights.
(a) Liquidation. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company, Holders shall be entitled, out of funds legally available
therefor, before any distribution or payment may be made by the Company or set aside for the holders of any Junior Stock and subject to the rights of the holders of any class or series of stock ranking senior to or on parity with Series J Preferred Stock upon liquidation and the rights of the Company’s depositors and other creditors, to receive in full a liquidating distribution in the amount of the liquidation preference of $25,000 per share (the “Series J Liquidation Preference”), plus any accrued dividends thereon from the last Dividend Payment Date to, but excluding, the date of the liquidation, dissolution or winding up if and to the extent declared but not yet paid. Holders shall not be entitled to any further payments in the event of any such voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company other than what is expressly provided for in this Section 5.
(b) Partial Payment. If the assets of the Company are not sufficient to pay in full the aforesaid liquidation distributions to the Holders and any liquidation distributions owed to holders of any class or series of stock of the Company ranking equally with the Series J Preferred Stock in the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the Company, the amounts paid to the Holders and to the holders of all such equally ranking stock shall be pro rata in accordance with the respective aggregate liquidating distributions to which they would otherwise be entitled.
(c) Merger, Consolidation and Sale of Assets Not Liquidation. For purposes of this Section 5, the sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the property and assets of the Company shall not be deemed a voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, nor shall the merger, consolidation or any other business combination transaction of the Company into or with any other corporation or Person or the merger, consolidation or any other business combination transaction of any other corporation or Person into or with the Company be deemed to be a voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company.
Section 6. Redemption.
(a) Optional Redemption. The Company, at the option of its Board of Directors or any duly authorized committee thereof, may redeem out of funds legally available therefor, (i) in whole or in part, from time to time, the shares of Series J Preferred Stock at the time outstanding, on any Dividend Payment Date on or after September 30, 2023, or (ii) in whole but not in part at any time within 90 days following a Regulatory Capital Event, in each case at a redemption price equal to $25,000 per share plus any declared and unpaid dividends, without accumulation of any undeclared dividends, to but excluding the redemption date, upon notice given as provided in Section 6(b) below.
(b) Notice of Redemption. Notice of every redemption of shares of Series J Preferred Stock shall be mailed by first class mail, postage prepaid, addressed to the Holders of such shares to be redeemed at their respective last addresses appearing on the stock register of the Company. Such mailing shall be at least 30 days and not more than 60 days before the date fixed for
redemption. Any notice mailed as provided in this Section 6(b) shall be conclusively presumed to have been duly given, whether or not the Holder receives such notice, but failure duly to give such notice by mail, or any defect in such notice or in the mailing thereof, to any Holder of shares of Series J Preferred Stock designated for redemption shall not affect the validity of the proceedings for the redemption of any other shares of Series J Preferred Stock. Each notice shall state:
(i) the redemption date;
(ii) the total number of shares of Series J Preferred Stock to be redeemed and, if fewer than all the shares of a Holder are to be redeemed, the number of such shares to be redeemed;
(iii) the redemption price;
(iv) the place or places where the certificates for such shares are to be surrendered for payment of the redemption price, if applicable; and
(v) that dividends on the shares to be redeemed will cease to accrue on the redemption date.
Notwithstanding the foregoing, if the certificates evidencing the shares of Series J Preferred Stock are held of record by a depositary and any related depository shares are held of record by a Depositary or its nominee, the Company may give such notice in any manner permitted by the Depositary.
(c) Partial Redemption. In case of any redemption of only part of the shares of Series A Preferred Stock at the time outstanding, the shares of Series J Preferred Stock to be redeemed shall be selected pro rata from the Holders in proportion to the number of shares of Series J Preferred Stock held by such Holders, by lot or in such other manner as the Board of Directors or any duly authorized committee thereof may determine, in its sole discretion, to be fair and equitable. Subject to the provisions of this Section 6, the Board of Directors or any duly authorized committee thereof shall have full power and authority to prescribe the terms and conditions upon which shares of Series J Preferred Stock shall be redeemed from time to time.
(d) Effectiveness of Redemption. If notice of redemption has been duly given and if on or before the redemption date specified in the notice all funds necessary for the redemption have been set aside by the Company, separate and apart from its other assets, for the pro rata benefit of the Holders of the shares called for redemption, so as to be and continue to be available therefor, or deposited by the Company with a bank or trust company selected by the Board of Directors or any duly authorized committee thereof (the “Trust”) in trust for the pro rata benefit of the Holders of the shares called for redemption, then, notwithstanding that any certificate for any share so called for redemption has not been surrendered for cancellation, on and after the redemption date all shares so called for redemption shall cease to be outstanding, all dividends with respect to such shares shall cease to accrue on such redemption date, and all rights with
respect to such shares shall forthwith on such redemption date cease and terminate, except only the right of the Holders thereof to receive the amount payable on such redemption from the Trust at any time after the redemption date from the funds so deposited, without interest. The Company shall be entitled to receive, from time to time, from the Trust any interest accrued on such funds, and the Holders of any shares called for redemption shall have no claim to any such interest. Any funds so deposited and unclaimed at the end of three years from the redemption date shall, to the extent permitted by law, be released or repaid to the Company, and in the event of such repayment to the Company, the Holders of the shares so called for redemption shall be deemed to be unsecured creditors of the Company for an amount equivalent to the amount deposited as stated above for the redemption of such shares and so repaid to the Company, but shall in no event be entitled to any interest.
Section 7. Voting Rights.
(a) General. The Holders shall not be entitled to vote on any matter except as set forth in Section 7(b) below or as required by the Delaware General Corporation Law.
(b) Special Voting Right.
(i) Voting Right. If and whenever dividends on the Series J Preferred Stock or any other class or series of preferred stock that ranks on parity with Series J Preferred Stock as to payment of dividends and upon which voting rights equivalent to those granted by this Section 7(b)(i) have been conferred and are exercisable (any such class or series being referred to herein as “dividend parity stock”) have not been paid in an aggregate amount equal, as to any class or series, to at least three semi-annual or six quarterly Dividend Periods, as applicable, (whether consecutive or not) (a “Nonpayment”), the authorized number of directors constituting the Board of Directors shall be increased by two, and the Holders, together with holders of dividend parity stock, shall have the right, voting separately as a single class without regard to class or series (and with voting rights allocated pro rata based on the liquidation preference of each such class or series), to the exclusion of the holders of Common Stock, to elect two directors of the Company to fill such newly created directorships (and to fill any vacancies in the terms of such directorships), provided that it shall be a qualification for election of any such director that the election of such director shall not cause the Company to violate the corporate governance requirements of the New York Stock Exchange (or other exchange on which the Company’s securities may be listed) that listed companies must have a majority of independent directors and further provided that the Board of Directors shall at no time include more than two such directors. Each such director elected by the Holders together with holders of dividend parity stock is a “Preferred Stock Director.”
(ii) Election. The election of the Preferred Stock Directors will take place at any annual meeting of stockholders or any special meeting of the Holders and any dividend parity stock, called as provided herein. At any time after the special voting power has vested pursuant to Section 7(b)(i) above, the secretary of the Company may, and upon the
written request (addressed to the secretary at the Company’s principal office) of the holders of at least 20% of the voting power of the Series J Preferred Stock or the holders of at least 20% of the voting power of any series of dividend parity stock (with such voting power measured based on the voting power to elect Preferred Stock Directors), must (unless such request is received less than 90 days before the date fixed for the next annual or special meeting of the stockholders at which Preferred Stock Directors are to be elected, in which event such election shall be held at such next annual or special meeting of stockholders), call a special meeting of the holders of Series J Preferred Stock and any dividend parity stock for the purposes of electing Preferred Stock Directors. The Preferred Stock Directors shall each be entitled to one vote per director on any matter.
(iii) Notice of Special Meeting. Notice for a special meeting to elect Preferred Stock Directors will be given in a similar manner to that provided in the Company’s by-laws for a special meeting of the stockholders. If the secretary of the Company does not call a special meeting within 20 days after receipt of any such request, then any Holder may (at the expense of the Company) call such meeting, upon notice as provided in this Section 7(b)(iii), and for that purpose will have access to the stock register of the Company. The Preferred Stock Directors elected at any such special meeting and each Preferred Stock Director elected at a subsequent annual or special meeting of stockholders, will be elected for term expiring upon the earlier of the Preferred Stock Director Termination Date and the next annual meeting of stockholders following such Preferred Stock Director's election. In case any vacancy in the office of a Preferred Stock Director occurs (other than prior to the initial election of the Preferred Stock Directors), the vacancy may be filled by the Preferred Stock Director remaining in office, or if none remains in office, by a plurality of the votes cast by the holders of Series J Preferred Stock and any dividend parity stock, voting together as a single class, and the Preferred Stock Director so appointed or elected to fill such vacancy shall serve for a term expiring at the next annual meeting of the stockholders. Preferred Stock Directors may only be elected by the holders of Series J Preferred Stock and dividend parity stock in accordance with this Section 7. If the holders of Series J Preferred Stock and such dividend parity stock fail to elect a sufficient number of directors to fill all directorships for which they are entitled to elect directors pursuant to this Section 7, then any directorship not so filled shall remain vacant until such time as the holders of Series J Preferred Stock and such dividend parity stock elect a person to fill such directorship in accordance with this Section 7, or such vacancy is otherwise filled in accordance with this Section 7; and no such directorship may be filled by stockholders of the Corporation other than in accordance with this Section 7.
(iv) Termination; Removal. Whenever the Company has paid noncumulative dividends in full for at least two consecutive semi-annual or four consecutive quarterly Dividend Periods following a Nonpayment on the Series J Preferred Stock and on any dividend parity stock entitled to noncumulative dividends and has paid cumulative dividends in full on any dividend parity stock entitled to cumulative dividends, then the right of the Holders to elect the Preferred Stock Directors will cease (but subject always to the same provisions for the vesting of the special voting rights in the case of any
similar non-payment of dividends in respect of future Dividend Periods) (the time of such cessation, the “Preferred Stock Director Termination Date”). Upon a Preferred Stock Director Termination Date, the terms of office of the Preferred Stock Directors will immediately terminate, the persons then serving as Preferred Stock Directors shall immediately cease to be qualified to hold office as Preferred Stock Directors, the Preferred Stock Directors shall cease to be directors of the Company and the number of directors constituting the Board of Directors shall be automatically reduced, without any action by the Board of Directors or the stockholders of the Company, by the number of Preferred Stock Directors authorized immediately prior to such termination. Any Preferred Stock Director may be removed at any time without cause by the holders of a majority of the voting power of outstanding shares of the capital stock then entitled to vote in the election of Preferred Stock Directors, voting together as a single class (with such voting power measured based on the voting power to elect Preferred Stock Directors).
(c) Senior Issuances; Adverse Changes. So long as any shares of Series J Preferred Stock are outstanding, but subject to the final paragraph of this Section 7(c), in addition to any other vote or consent of holders of the Company’s capital stock required by Delaware law, the vote or consent of the holders of at least two-thirds of the voting power of the Series J Preferred Stock and the holders of any other preferred stock entitled to vote thereon, voting together as a single class, given in person or by proxy at an annual or special meeting of stockholders, or given in writing without a meeting, will be necessary for effecting or validating any of the following actions, whether or not such approval is required by Delaware law:
(i) any amendment, alteration or repeal of any provision of the Company’s certificate of incorporation (including the certificate of designations creating the Series J Preferred Stock) or the Company’s by-laws that would alter or change the voting powers, preferences, economic rights or special rights of the Series J Preferred Stock so as to affect them adversely;
(ii) any amendment or alteration of the Company’s certificate of incorporation to authorize or create, or increase the authorized amount of, any shares of, or any securities convertible into shares of, any class or series of the Company's capital stock ranking prior to the Series J Preferred Stock in the payment of dividends or in the distribution of assets on any liquidation, dissolution, or winding up of the Company; or
(iii) the consummation of a binding share exchange or reclassification involving the Series J Preferred Stock or a merger or consolidation of the Company with another entity, except that holders of Series J Preferred Stock will have no right to vote under this provision or otherwise under Delaware law if in each case (i) the Series J Preferred Stock remains outstanding or, in the case of any such merger or consolidation with respect to which the Company is not the surviving or resulting entity, is converted into or exchanged for preferred securities of the surviving or resulting entity or its ultimate parent, that is an entity organized and existing under the laws of the United States of America, any state thereof or the District of Columbia and that is a corporation for U.S.
federal income tax purposes (or if such entity is not a corporation, the Company having received an opinion of nationally recognized counsel experienced in such matters to the effect that Holders will be subject to tax for U.S. federal income tax purposes with respect to such new preferred securities after such merger or consolidation in the same amount, at the same time and otherwise in the same manner as would have been the case under the Series J Preferred Stock prior to such merger or consolidation), and (ii) such Series J Preferred Stock remaining outstanding or such preferred securities, as the case may be, have such rights, preferences, privileges and voting powers, taken as a whole, as are not materially less favorable to the holders thereof than the rights, preferences, privileges and voting powers of the Series J Preferred Stock, taken as a whole;
provided, however, that, for the avoidance of doubt, any increase in the amount of the authorized or issued Series J Preferred Stock or authorized preferred stock or any securities convertible into preferred stock or the creation and issuance, or an increase in the authorized or issued amount, of other series of preferred stock or any securities convertible into preferred stock ranking equally with and/or junior to the Series J Preferred Stock with respect to the payment of dividends (whether such dividends are cumulative or noncumulative) and/or the distribution of assets upon the Company’s liquidation, dissolution or winding up will not be deemed to adversely affect the voting powers, preferences or special rights of the Series J Preferred Stock, and no stockholder will have the right to vote on such an increase, creation or issuance by reason of this Section 7.
If any amendment, alteration, repeal, share exchange, reclassification, merger or consolidation specified in this Section 7(c) would adversely affect the Series J Preferred Stock but not all series of preferred stock of the Company, then only such series of preferred stock as are adversely affected by and entitled to vote on the matter shall vote on the matter together with the Series J Preferred Stock as a single class (in lieu of all other series of preferred stock) for purposes of the vote or consent required by this Section 7(c).
(d) No Vote if Redemption. No vote or consent of the Holders shall be required pursuant to Section 7(b) or 7(c) if, at or prior to the time when the act with respect to such vote or consent would otherwise be required shall be effected, the Company shall have redeemed or shall have called for redemption all outstanding shares of Series J Preferred Stock, with proper notice and sufficient funds having been set aside for such redemption, in each case pursuant to Section 6 above.
Section 8. Preemption and Conversion Rights.
The Holders shall not have any preemptive rights or conversion rights as a result of the terms hereof.
Section 9. Rank.
For the avoidance of doubt, the Board of Directors or any duly authorized committee thereof may, without the vote of the Holders, authorize and issue additional shares of Junior Stock or shares of any class or series of stock of the Company now existing or hereafter authorized that ranks equally with the Series J Preferred Stock in the payment of dividends or in the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the Company.
Section 10. Reacquired Shares.
The Board of Directors shall take such actions as are necessary to cause the shares of Series J Preferred Stock which have been redeemed or otherwise purchased or acquired by the Company to be retired and restored to the status of authorized but unissued shares of preferred stock without designation as to series.
Section 11. No Sinking Fund.
Shares of Series J Preferred Stock are not subject to the operation of a sinking fund.
Section 12. Transfer Agent, Calculation Agent, Registrar and Paying Agent.
The duly appointed Transfer Agent, Calculation Agent, Registrar and paying agent for the Series J Preferred Stock shall be Computershare Trust Company, N.A. The Company may, in its sole discretion, remove the Transfer Agent in accordance with the agreement between the Company and the Transfer Agent; provided, however, that the Company shall appoint a successor transfer agent who shall accept such appointment prior to the effectiveness of such removal. Upon any such removal or appointment, the Company shall send notice thereof by first-class mail, postage prepaid, to the Holders.
Section 13. Replacement Certificates for Mutilated, Destroyed, Stolen and Lost Certificates.
If physical certificates are issued, the Company shall replace any mutilated certificate at the Holder’s expense upon surrender of that certificate to the Transfer Agent. The Company shall replace certificates that become destroyed, stolen or lost at the Holder’s expense upon delivery to the Company and the Transfer Agent of satisfactory evidence that the certificate has been destroyed, stolen or lost, together with any indemnity that may be required by the Transfer Agent and the Company.
Section 14. Form.
(a) Series J Preferred Stock Certificates. Series J Preferred Stock shall be issued in certificated form in substantially the form attached hereto as Exhibit A (each, a “Series J Preferred Stock Certificate”). Exhibit A is hereby incorporated in and expressly made a part of this Certificate of Designations. The Series J Preferred Stock Certificates may have notations,
legends or endorsements required by law, stock exchange rules, agreements to which the Company is subject, if any, or usage (provided that any such notation, legend or endorsement is in a form acceptable to the Company).
(b) Signature. Two Officers shall sign any Series J Preferred Stock Certificate for the Company, in accordance with the Company’s by-laws and applicable law, by manual or facsimile signature. If an Officer whose signature is on a Series J Preferred Stock Certificate no longer holds that office at the time the Transfer Agent countersigned the Series J Preferred Stock Certificate, such Series J Preferred Stock Certificate shall be valid nevertheless. A Series J Preferred Stock Certificate shall not be valid until an authorized signatory of the Transfer Agent manually countersigns such Series J Preferred Stock Certificate. Each Series J Preferred Stock Certificate shall be dated the date of its countersignature.
Section 15. Taxes.
(a) Transfer Taxes. The Company shall pay any and all stock transfer, documentary, stamp and similar taxes that may be payable in respect of any issuance or delivery of shares of Series J Preferred Stock. The Company shall not, however, be required to pay any such tax that may be payable in respect of any transfer involved in the issuance or delivery of shares of Series J Preferred Stock, in a name other than that in which the shares of Series J Preferred Stock were registered, or in respect of any payment to any Person other than a payment to the registered holder thereof, and shall not be required to make any such issuance, delivery or payment unless and until the Person otherwise entitled to such issuance, delivery or payment has paid to the Company the amount of any such tax or has established, to the satisfaction of the Company, that such tax has been paid or is not payable.
(b) Withholding. All payments and distributions (or deemed distributions) on the shares of Series J Preferred Stock shall be subject to withholding and backup withholding of tax to the extent required by law, subject to applicable exemptions, and amounts withheld, if any, shall be treated as received by Holders.
Section 16. Notices.
All notices referred to herein shall be in writing, and, unless otherwise specified herein, all notices hereunder shall be deemed to have been given upon the earlier of receipt thereof or three Business Days after the mailing thereof if sent by registered or certified mail (unless first class mail shall be specifically permitted for such notice under the terms of this Certificate of Designations) with postage prepaid, addressed: (i) if to the Company, to its office at 399 Park Avenue, New York, New York 10043 (Attention: Corporate Secretary) or to the Transfer Agent at its office at 250 Royall Street, Canton, Massachusetts 02021, or other agent of the Company designated as permitted by this Certificate of Designations, or (ii) if to any Holder, to such Holder at the address of such Holder as listed in the stock record books of the Company (which may include the records of the Transfer Agent) or (iii) to such other address as the Company or any such Holder, as the case may be, shall have designated by notice similarly given.
Section 17. Other Rights Disclaimed.
The shares of Series J Preferred Stock have no voting powers, preferences or relative, participating, optional or other special rights, or qualifications, limitations or restrictions thereof, other than as set forth herein or in the Certificate of Incorporation of the Company.
IN WITNESS WHEREOF, this Certificate of Designations as has been executed on behalf of the Company by its Chief Accounting Officer this 18th day of September, 2013.
CITIGROUP INC.
By: _/s/ Jeffrey R. Walsh________________ Name: Jeffrey R. Walsh Title: Chief Accounting Officer
Exhibit A
FORM OF 7.125% FIXED RATE / FLOATING RATE NONCUMULATIVE PREFERRED STOCK, SERIES J
Certificate Number_______ Number of Shares of Series J Preferred Stock______
CUSIP NO.:
CITIGROUP INC.
7.125% Fixed Rate / Floating Rate Noncumulative Preferred Stock, Series J
(par value $1.00 per share) (liquidation preference $25,000 per share)
Citigroup Inc., a Delaware corporation (the “Company”), hereby certifies that [ ] (the “Holder”) is the registered owner of [ ] fully paid and non-assessable shares of the Company’s designated 7.125% Fixed Rate / Floating Rate Noncumulative Preferred Stock, Series J, with a par value of $1.00 per share and a liquidation preference of $25,000 per share (the “Series J Preferred Stock”). The shares of Series J Preferred Stock are transferable on the books and records of the Registrar, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer. The designations, rights, privileges, restrictions, preferences and other terms and provisions of the Series J Preferred Stock represented hereby are and shall in all respects be subject to the provisions of the Certificate of Designations dated September 18, 2013 as the same may be amended from time to time (the “Certificate of Designations”). Capitalized terms used herein but not defined shall have the meaning given them in the Certificate of Designations. The Company will provide a copy of the Certificate of Designations to a Holder without charge upon written request to the Company at its principal place of business.
Reference is hereby made to select provisions of the Series J Preferred Stock set forth on the reverse hereof, and to the Certificate of Designations, which select provisions and the Certificate of Designations shall for all purposes have the same effect as if set forth at this place.
Upon receipt of this certificate, the Holder is bound by the Certificate of Designations and is entitled to the benefits thereunder.
Unless the Registrar has properly countersigned, these shares of Series J Preferred Stock shall not be entitled to any benefit under the Certificate of Designations or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, this certificate has been executed on behalf of the Company by its [Title] and by its [Title] this __ day of ________, ________.
CITIGROUP INC.
By: _______________________________________ Name: Title:
By: _______________________________________ Name: Title:
REGISTRAR’S COUNTERSIGNATURE
These are shares of Series J Preferred Stock referred to in the within-mentioned Certificate of Designations.
Dated:
COMPUTERSHARE TRUST COMPANY, N.A., as Registrar
By: _______________________________________ Name: Title:
REVERSE OF CERTIFICATE
Dividends on each share of Series J Preferred Stock shall be payable at the rate provided in the Certificate of Designations.
The shares of Series J Preferred Stock shall be redeemable at the option of the Company in the manner and in accordance with the terms set forth in the Certificate of Designations.
The Company shall furnish without charge to each holder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class or series of share capital issued by the Company and the qualifications, limitations or restrictions of such preferences and/or rights.
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers the shares of Series J Preferred Stock evidenced hereby to:
___________________________________________________
___________________________________________________
(Insert assignee’s social security or taxpayer identification number, if any)
___________________________________________________
___________________________________________________
(Insert address and zip code of assignee)
and irrevocably appoints:
___________________________________________________
___________________________________________________
as agent to transfer the shares of Series J Preferred Stock evidenced hereby on the books of the Transfer Agent. The agent may substitute another to act for him or her.
Date:
Signature:
___________________________________________________
(Sign exactly as your name appears on the other side of this Certificate)
Signature Guarantee: ___________________________________________________
(Signature must be guaranteed by an “eligible guarantor institution” that is a bank, stockbroker, savings and loan association or credit union meeting the requirements of the Transfer Agent, which requirements include membership or participation in the Securities Transfer Agents Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Transfer Agent in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.)
CERTIFICATE OF RETIREMENT
OF PREFERRED STOCK
OF CITIGROUP INC.
(Pursuant to Section 243 of the General
Corporation Law of the State of Delaware)
CITIGROUP INC., a corporation duly organized and existing under the General Corporation Law of the State of Delaware, certifies as follows:
FIRST: Citigroup's Restated Certificate of Incorporation, as amended (the "Certificate of Incorporation"), authorizes the issuance of up to 31,000 shares of Series R Cumulative Participating Preferred Stock (the "Series R Preferred Stock"), with $1.00 par value per share.
SECOND: No shares of the Series R Preferred Stock have been or will be issued.
THIRD: Pursuant to the provisions of Section 243 of the General Corporation Law of the State of Delaware, all references to the Series R Preferred Stock in the Certificate of Incorporation are hereby eliminated, and the shares that were designated to such series are hereby returned to the status of authorized but unissued shares of the Preferred Stock of Citigroup.
IN WITNESS WHEREOF, CITIGROUP INC. has caused this certificate to be signed by the below duly authorized Assistant Secretary this 9th day of October, 2013.
CITIGROUP INC.
By: /s/Michael J. Tarpley
Michael J. Tarpley
Assistant Secretary
CERTIFICATE OF DESIGNATIONS
OF
6.875% FIXED RATE / FLOATING RATE NONCUMULATIVE PREFERRED STOCK SERIES K
OF
CITIGROUP INC.
______________________________
pursuant to Section 151 of the
General Corporation Law of the State of Delaware
______________________________
Citigroup Inc., a Delaware corporation (the “Company”), hereby certifies that:
1. The Restated Certificate of Incorporation of the Company (as amended through the date hereof, the “Certificate of Incorporation”) fixes the total number of shares of all classes of capital stock that the Company shall have the authority to issue at six billion (6,000,000,000) shares of common stock, par value $0.01 per share, and thirty million (30,000,000) shares of preferred stock, par value $1.00 per share.
2. The Certificate of Incorporation expressly grants to the Board of Directors of the Company (the “Board of Directors”) authority to provide for the issuance of the shares of preferred stock in series, and to establish from time to time the number of shares to be included in each such series and to fix the designation, powers, preferences and rights of the shares of each such series and the qualifications, limitations or restrictions thereof.
3. Pursuant to the authority conferred upon a preferred stock committee (the “Preferred Stock Committee”) by the Board of Directors, the Preferred Stock Committee, by action duly taken on October 24, 2013, adopted resolutions (i) authorizing the issuance and sale of up to 59,800 shares of the Company’s preferred stock and (ii) approving this final form of Certificate of Designations of 6.875% Fixed Rate / Floating Rate Noncumulative Preferred Stock, Series K (the “Series K Preferred Stock”) establishing the number of shares to be included in this Series K Preferred Stock and fixing the designation, powers, preferences and rights of the shares of this Series K Preferred Stock and the qualifications, limitations or restrictions thereof as follows:
Section 1. Designation.
The designation of the series of preferred stock shall be “6.875% Fixed Rate / Floating Rate Noncumulative Preferred Stock, Series K” (the “Series K Preferred Stock”). Each share of Series K Preferred Stock shall be identical in all respects to every other share of Series K Preferred Stock.
Section 2. Number of Shares.
The number of authorized shares of Series K Preferred Stock shall be 59,800. That number from time to time may be increased (but not in excess of the total number of authorized shares of preferred stock) or decreased (but not below the number of shares of Series K Preferred Stock then outstanding) by further resolution duly adopted by the Board of Directors, the Preferred Stock Committee or any other duly authorized committee thereof and by the filing of a certificate pursuant to the provisions of the General Corporation Law of the State of Delaware stating that such increase or reduction, as the case may be, has been so authorized. The Company shall have the authority to issue fractional shares of Series K Preferred Stock.
Section 3. Definitions. As used herein with respect to Series K Preferred Stock:
“Appropriate Federal Banking Agency” means the “appropriate federal banking agency” with respect to the Company as that term is defined in Section 3(q) of the Federal Deposit Insurance Act of 1950, as amended, or any successor provision.
“Board of Directors” has the meaning set forth in the recitals above.
“Business Day” means any weekday that is not a legal holiday in New York City and is not a day on which banking institutions in New York City are authorized or required by law or regulation to be closed.
“Calculation Agent” means the Transfer Agent acting in its capacity as calculation agent for the Series K Preferred Stock, and its successors and assigns.
“Common Stock” means the common stock of the Company, par value $0.01 per share, or any other shares of the capital stock of the Company into which such shares of common stock shall be reclassified or changed.
“Depositary” means DTC or its nominee or any successor depositary appointed by the Company.
“Dividend Payment Date” shall have the meaning set forth in Section 4(a) hereof.
“Dividend Period” shall have the meaning set forth in Section 4(a) hereof.
“Dividend Record Date” shall have the meaning set forth in Section 4(a) hereof.
“DTC” means The Depository Trust Company.
“Holder” means the Person in whose name the shares of the Series K Preferred Stock are registered, which may be treated by the Company, Calculation Agent, Transfer Agent, Registrar and paying agent as the absolute owner of the shares of Series K Preferred Stock for the purpose of making payment and for all other purposes.
“Junior Stock” means the Common Stock and any other class or series of stock of the
Company now existing or hereafter authorized over which Series K Preferred Stock has
preference or priority in the payment of dividends or in the distribution of assets on any
voluntary or involuntary liquidation, dissolution or winding up of the Company.
“LIBOR Determination Date” means the second London Banking Day immediately preceding the first day of the relevant Dividend Period.
“London Banking Day” means any day on which commercial banks are open for general business (including dealings in deposits in United States dollars) in London.
“Nonpayment” shall have the meaning set forth in Section 7(b)(i) hereof.
“Officer” means the Chief Executive Officer, the Chairman, the Chief Administrative Officer, any Vice Chairman, the Chief Financial Officer, the Controller, the Chief Accounting Officer, the Treasurer, any Deputy Treasurer, any Assistant Treasurer, any Vice President, the General Counsel and Corporate Secretary and any Assistant Secretary of the Company.
“Person” means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint-stock company, limited liability company, trust, or other entity.
“Preferred Stock Director” shall have the meaning set forth in Section 7(b)(i) hereof.
“Preferred Stock Director Termination Date” shall have the meaning set forth in Section 7(b)(iv) hereof.
“Registrar” means the Transfer Agent acting in its capacity as registrar for the Series K Preferred Stock, and its successors and assigns.
“Regulatory Capital Event” means the good faith determination by the Company that, as a result of (i) any amendment to, clarification of, or change in, the laws or regulations of the United States or any political subdivision of or in the United States that is enacted or becomes effective after the initial issuance of any share of the Series K Preferred Stock, (ii) any proposed change in those laws or regulations that is announced or becomes effective after the initial issuance of any share of the Series K Preferred Stock, or (iii) any official administrative decision or judicial decision or administrative action or other official pronouncement interpreting or applying those laws or regulations or policies with respect thereto that is announced after the initial issuance of any share of the Series K Preferred Stock, there is more than an insubstantial risk that the Company will not be entitled to treat the full liquidation preference amount of $25,000 per share of the Series K Preferred Stock then outstanding as “tier 1 capital” (or its equivalent) for purposes of the capital adequacy guidelines of the Federal Reserve (or, as and if applicable, the capital adequacy guidelines or regulations of any successor Appropriate Federal Banking Agency) as then in effect and applicable, for so long as any share of the Series K Preferred Stock is outstanding.
“Reuters LIBOR01” means the display designated on the Reuters 3000 Xtra Service on page LIBOR01 Page (or such other page as may replace “Reuters LIBOR01” page on the service or such other service as may be nominated by the British Bankers’ Association or other administrator of LIBOR for the purpose of displaying London interbank offered rates for United States dollar deposits or loans).
“Series K Preferred Stock” shall have the meaning set forth in Section 1 hereof.
“Series K Preferred Stock Certificate” shall have the meaning set forth in Section 14(a) hereof.
“Three-month LIBOR” means the rate (expressed as a percentage per annum) for deposits in United States dollars for a three-month period commencing on the first day of a Dividend Period that appears on the Reuters LIBOR01 page as of 11:00 a.m. (London time) on the LIBOR Determination Date for that Dividend Period. If such rate does not appear on the Reuters LIBOR01 page, Three-month LIBOR will be determined on the basis of the rates at which deposits in United States dollars for a three-month period commencing on the first day of that Dividend Period and in a principal amount of not less than $1 million are offered to prime banks in the London interbank market by four major banks in the London interbank market selected by the Calculation Agent (after consultation with the Company), at approximately 11:00 a.m., London time, on the LIBOR Determination Date for that Dividend Period. The Calculation Agent will request the principal London office of each of such banks to provide a quotation of its rate. If at least two such quotations are provided, Three-month LIBOR with respect to that Dividend Period will be the arithmetic mean (rounded upward if necessary to the nearest whole multiple of 0.00001%) of such quotations. If fewer than two quotations are provided, Three-month LIBOR with respect to that Dividend Period will be the arithmetic mean (rounded upward if necessary to the nearest whole multiple of 0.00001%) of the rates quoted by three major banks in New York City selected by the Calculation Agent (after consultation with the Company), at approximately 11:00 a.m., New York City time, on the LIBOR Determination Date for that Dividend Period for loans in United States dollars to leading European banks for a three-month period commencing on the first day of that Dividend Period and in a principal amount of not less than $1 million. However, if fewer than three banks selected by the Calculation Agent to provide quotations are quoting as described above, Three-month LIBOR for that Dividend Period will be the same Three-month LIBOR as determined for the previous Dividend Period or, in the case of the Dividend Period beginning on November 15, 2023, 0.2381%. The determination of Three-month LIBOR for each relevant Dividend Period by the Calculation Agent will (in the absence of manifest error) be final and binding.
“Transfer Agent” means Computershare Trust Company, N.A., a federally chartered national association, acting as Transfer Agent, Calculation Agent, Registrar and paying agent for the Series K Preferred Stock, and its successors and assigns.
“Trust” shall have the meaning set forth in Section 6(d).
Section 4. Dividends.
(a) Rate. Holders shall be entitled to receive, when, as and if declared by the Board of Directors or any duly authorized committee thereof, but only out of funds legally available therefor, noncumulative cash dividends on each share of Series K Preferred Stock in the amounts specified below in this Section 4, and no more, payable quarterly in arrears on each February 15, May 15, August 15 and November 15, beginning February 15, 2014, from and including the date of issuance; provided, however, if any such day is not a Business Day, then payment of any dividend otherwise payable on that date will be made on the next succeeding day that is a Business Day (except if after November 15, 2023, that day falls in the next calendar month, in which case the payment of any dividend otherwise payable will be made on the first preceding Business Day), (i) on or prior to November 15, 2023, without any interest or other payment in respect of such postponement, and (ii) after November 15, 2023, with dividends accruing to the actual payment date (each such day on which dividends are payable a “Dividend Payment Date”). The period from and including the date of issuance of the Series K Preferred Stock or any Dividend Payment Date to, but excluding, the next Dividend Payment Date is a “Dividend Period.” Dividends on each share of Series K Preferred Stock will accrue on the liquidation preference of $25,000 per share at a rate per annum equal to (i) 6.875%, for each Dividend Period from and including the date of issuance to, but excluding, November 15, 2023 and (ii) Three-month LIBOR plus 4.130%, for each Dividend Period from and including November 15, 2023. The record date for payment of dividends on the Series K Preferred Stock will be the record date fixed by the Board of Directors or any other duly authorized committee thereof that is not more than 30 nor less than 10 days prior to such Dividend Payment Date (each, a “Dividend Record Date”). Any such day that is a Dividend Record Date will be a Dividend Record Date whether or not such day is a Business Day. The amount of dividends payable on or prior to November 15, 2023 will be computed on the basis of a 360-day year of twelve 30-day months. The amount of dividends payable after November 15, 2023 will be computed on the basis of a 360-day year and the actual number of days elapsed.
(b) Noncumulative Dividends. If the Board of Directors or any duly authorized committee thereof does not declare a dividend on the Series K Preferred Stock for any Dividend Period prior to the related Dividend Payment Date, that dividend will not accrue, and the Company will have no obligation to pay, and Holders shall have no right to receive, a dividend for that Dividend Period on the related Dividend Payment Date or at any future time, whether or not dividends on the Series K Preferred Stock or any other series of preferred stock or common stock are declared for any subsequent period. References herein to the “accrual” of dividends refer only to the determination of the amount of such dividend and do not imply that any right to a dividend arises prior to the date on which a dividend is declared.
(c) Priority of Dividends. So long as any share of Series K Preferred Stock remains outstanding, unless as to a Dividend Payment Date full dividends on all outstanding shares of the Series K Preferred Stock have been declared and paid or declared and a sum sufficient for the payment of those dividends has been set aside for the Dividend Period then ending, the Company will not, and will cause its subsidiaries not to, during the next succeeding Dividend Period that commences on such Dividend Payment Date, declare or pay any dividend on, make any
distributions relating to, or redeem, purchase, acquire or make a liquidation payment relating to, any Junior Stock, or make any guarantee payment with respect thereto, other than:
(i) purchases, redemptions or other acquisitions of shares of Junior Stock in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of employees, officers, directors or consultants;
(ii) purchases of shares of Common Stock pursuant to a contractually binding requirement to buy stock existing prior to the commencement of the then-current Dividend Period, including under a contractually binding stock repurchase plan;
(iii) as a result of an exchange or conversion of any class or series of Junior Stock for any other class or series of Junior Stock;
(iv) the purchase of fractional interests in shares of Junior Stock pursuant to the conversion or exchange provisions of such Junior Stock or the security being converted or exchanged;
(v) the purchase of Junior Stock by an investment banking subsidiary of the Company in connection with the distribution thereof; or
(vi) the purchase of Junior Stock by any investment banking subsidiary of the Company in connection with market-making or other secondary market activities in the ordinary course of the business of such subsidiary.
The restrictions set forth in the preceding provisions of this Section 4(c) shall not apply to any Junior Stock dividends paid by the Company where the dividend is in the form of the same stock (or the right to buy the same stock) as that on which the dividend is being paid.
Except as provided below, for so long as any share of Series K Preferred Stock remains outstanding, if dividends are not declared and paid in full upon the shares of Series K Preferred Stock and any class or series of stock of the Company now existing or hereafter authorized that ranks equally with the Series K Preferred Stock in the payment of dividends, all dividends declared upon shares of Series K Preferred Stock and such other stock will be declared on a proportional basis so that the amount of dividends declared per share will bear to each other the same ratio that accrued dividends for the then-current Dividend Period per share of Series K Preferred Stock and accrued dividends for the then-current Dividend Period per share of such other stock (including, in the case of any such other stock that bears cumulative dividends, all accrued and unpaid dividends) bear to each other.
Subject to the foregoing, and not otherwise, such dividends payable in cash, stock or otherwise, as may be determined by the Board of Directors or any duly authorized committee thereof, may be declared and paid on any other class or series of stock of the Company from time to time out of any funds legally available for such payment, and Holders will not be entitled to participate in those dividends.
Section 5. Liquidation Rights.
(a) Liquidation. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company, Holders shall be entitled, out of funds legally available therefor, before any distribution or payment may be made by the Company or set aside for the holders of any Junior Stock and subject to the rights of the holders of any class or series of stock ranking senior to or on parity with Series K Preferred Stock upon liquidation and the rights of the Company’s depositors and other creditors, to receive in full a liquidating distribution in the amount of the liquidation preference of $25,000 per share (the “Series K Liquidation Preference”), plus any accrued dividends thereon from the last Dividend Payment Date to, but excluding, the date of the liquidation, dissolution or winding up if and to the extent declared but not yet paid. Holders shall not be entitled to any further payments in the event of any such voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company other than what is expressly provided for in this Section 5.
(b) Partial Payment. If the assets of the Company are not sufficient to pay in full the aforesaid liquidation distributions to the Holders and any liquidation distributions owed to holders of any class or series of stock of the Company ranking equally with the Series K Preferred Stock in the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the Company, the amounts paid to the Holders and to the holders of all such equally ranking stock shall be pro rata in accordance with the respective aggregate liquidating distributions to which they would otherwise be entitled.
(c) Merger, Consolidation and Sale of Assets Not Liquidation. For purposes of this Section 5, the sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the property and assets of the Company shall not be deemed a voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, nor shall the merger, consolidation or any other business combination transaction of the Company into or with any other corporation or Person or the merger, consolidation or any other business combination transaction of any other corporation or Person into or with the Company be deemed to be a voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company.
Section 6. Redemption.
(a) Optional Redemption. The Company, at the option of its Board of Directors or any duly authorized committee thereof, may redeem out of funds legally available therefor, (i) in whole or in part, from time to time, the shares of Series K Preferred Stock at the time outstanding, on any Dividend Payment Date on or after November 15, 2023, or (ii) in whole but not in part at any time within 90 days following a Regulatory Capital Event, in each case at a redemption price equal to $25,000 per share plus any declared and unpaid dividends, without
accumulation of any undeclared dividends, to but excluding the redemption date, upon notice given as provided in Section 6(b) below.
(b) Notice of Redemption. Notice of every redemption of shares of Series K Preferred Stock shall be mailed by first class mail, postage prepaid, addressed to the Holders of such shares to be redeemed at their respective last addresses appearing on the stock register of the Company. Such mailing shall be at least 30 days and not more than 60 days before the date fixed for redemption. Any notice mailed as provided in this Section 6(b) shall be conclusively presumed to have been duly given, whether or not the Holder receives such notice, but failure duly to give such notice by mail, or any defect in such notice or in the mailing thereof, to any Holder of shares of Series K Preferred Stock designated for redemption shall not affect the validity of the proceedings for the redemption of any other shares of Series K Preferred Stock. Each notice shall state:
(i) the redemption date;
(ii) the total number of shares of Series K Preferred Stock to be redeemed and, if fewer than all the shares of a Holder are to be redeemed, the number of such shares to be redeemed;
(iii) the redemption price;
(iv) the place or places where the certificates for such shares are to be surrendered for payment of the redemption price, if applicable; and
(v) that dividends on the shares to be redeemed will cease to accrue on the redemption date.
Notwithstanding the foregoing, if the certificates evidencing the shares of Series K Preferred Stock are held of record by a depositary and any related depository shares are held of record by a Depositary or its nominee, the Company may give such notice in any manner permitted by the Depositary.
(c) Partial Redemption. In case of any redemption of only part of the shares of Series A Preferred Stock at the time outstanding, the shares of Series K Preferred Stock to be redeemed shall be selected (i) pro rata from the Holders in proportion to the number of shares of Series K Preferred Stock held by such Holders, (ii) by lot or (iii) in such other manner as the Board of Directors or any duly authorized committee thereof may determine, in its sole discretion, to be fair and equitable; provided, however, that if for so long as the Series K Preferred Stock or depositary shares in respect thereof are listed on the New York Stock Exchange, the foregoing clause (iii) shall apply only if such method of selection is not then prohibited by any then applicable rule of the New York Stock Exchange or the New York Stock Exchange consents to or grants a waiver or exemption from such rule. Subject to the provisions of this Section 6, the Board of Directors or any duly authorized committee thereof shall have full power and authority
to prescribe the terms and conditions upon which shares of Series K Preferred Stock shall be redeemed from time to time.
(d) Effectiveness of Redemption. If notice of redemption has been duly given and if on or before the redemption date specified in the notice all funds necessary for the redemption have been set aside by the Company, separate and apart from its other assets, for the pro rata benefit of the Holders of the shares called for redemption, so as to be and continue to be available therefor, or deposited by the Company with a bank or trust company selected by the Board of Directors or any duly authorized committee thereof (the “Trust”) in trust for the pro rata benefit of the Holders of the shares called for redemption, then, notwithstanding that any certificate for any share so called for redemption has not been surrendered for cancellation, on and after the redemption date all shares so called for redemption shall cease to be outstanding, all dividends with respect to such shares shall cease to accrue on such redemption date, and all rights with respect to such shares shall forthwith on such redemption date cease and terminate, except only the right of the Holders thereof to receive the amount payable on such redemption from the Trust at any time after the redemption date from the funds so deposited, without interest. The Company shall be entitled to receive, from time to time, from the Trust any interest accrued on such funds, and the Holders of any shares called for redemption shall have no claim to any such interest. Any funds so deposited and unclaimed at the end of three years from the redemption date shall, to the extent permitted by law, be released or repaid to the Company, and in the event of such repayment to the Company, the Holders of the shares so called for redemption shall be deemed to be unsecured creditors of the Company for an amount equivalent to the amount deposited as stated above for the redemption of such shares and so repaid to the Company, but shall in no event be entitled to any interest.
Section 7. Voting Rights.
(a) General. The Holders shall not be entitled to vote on any matter except as set forth in Section 7(b) below or as required by the Delaware General Corporation Law.
(b) Special Voting Right.
(i) Voting Right. If and whenever dividends on the Series K Preferred Stock or any other class or series of preferred stock that ranks on parity with Series K Preferred Stock as to payment of dividends and upon which voting rights equivalent to those granted by this Section 7(b)(i) have been conferred and are exercisable (any such class or series being referred to herein as “dividend parity stock”) have not been paid in an aggregate amount equal, as to any class or series, to at least three semi-annual or six quarterly Dividend Periods, as applicable, (whether consecutive or not) (a “Nonpayment”), the authorized number of directors constituting the Board of Directors shall be increased by two, and the Holders, together with holders of dividend parity stock, shall have the right, voting separately as a single class without regard to class or series (and with voting rights allocated pro rata based on the liquidation preference of each such class or series), to the exclusion of the holders of Common Stock, to elect two directors
of the Company to fill such newly created directorships (and to fill any vacancies in the terms of such directorships), provided that it shall be a qualification for election of any such director that the election of such director shall not cause the Company to violate the corporate governance requirements of the New York Stock Exchange (or other exchange on which the Company’s securities may be listed) that listed companies must have a majority of independent directors and further provided that the Board of Directors shall at no time include more than two such directors. Each such director elected by the Holders together with holders of dividend parity stock is a “Preferred Stock Director.”
(ii) Election. The election of the Preferred Stock Directors will take place at any annual meeting of stockholders or any special meeting of the Holders and any dividend parity stock, called as provided herein. At any time after the special voting power has vested pursuant to Section 7(b)(i) above, the secretary of the Company may, and upon the written request (addressed to the secretary at the Company’s principal office) of the holders of at least 20% of the voting power of the Series K Preferred Stock or the holders of at least 20% of the voting power of any series of dividend parity stock (with such voting power measured based on the voting power to elect Preferred Stock Directors), must (unless such request is received less than 90 days before the date fixed for the next annual or special meeting of the stockholders at which Preferred Stock Directors are to be elected, in which event such election shall be held at such next annual or special meeting of stockholders), call a special meeting of the holders of Series K Preferred Stock and any dividend parity stock for the purposes of electing Preferred Stock Directors. The Preferred Stock Directors shall each be entitled to one vote per director on any matter.
(iii) Notice of Special Meeting. Notice for a special meeting to elect Preferred Stock Directors will be given in a similar manner to that provided in the Company’s by-laws for a special meeting of the stockholders. If the secretary of the Company does not call a special meeting within 20 days after receipt of any such request, then any Holder may (at the expense of the Company) call such meeting, upon notice as provided in this Section 7(b)(iii), and for that purpose will have access to the stock register of the Company. The Preferred Stock Directors elected at any such special meeting and each Preferred Stock Director elected at a subsequent annual or special meeting of stockholders, will be elected for term expiring upon the earlier of the Preferred Stock Director Termination Date and the next annual meeting of stockholders following such Preferred Stock Director's election. In case any vacancy in the office of a Preferred Stock Director occurs (other than prior to the initial election of the Preferred Stock Directors), the vacancy may be filled by the Preferred Stock Director remaining in office, or if none remains in office, by a plurality of the votes cast by the holders of Series K Preferred Stock and any dividend parity stock, voting together as a single class, and the Preferred Stock Director so appointed or elected to fill such vacancy shall serve for a term expiring at the next annual meeting of the stockholders. Preferred Stock Directors may only be elected by the holders of Series K Preferred Stock and dividend parity stock in accordance with this Section 7. If the holders of Series K Preferred Stock and such dividend parity stock fail to elect a sufficient number of directors to fill all directorships for which they are entitled to elect directors pursuant to this Section 7, then any
directorship not so filled shall remain vacant until such time as the holders of Series K Preferred Stock and such dividend parity stock elect a person to fill such directorship in accordance with this Section 7, or such vacancy is otherwise filled in accordance with this Section 7; and no such directorship may be filled by stockholders of the Corporation other than in accordance with this Section 7.
(iv) Termination; Removal. Whenever the Company has paid noncumulative dividends in full for at least two consecutive semi-annual or four consecutive quarterly Dividend Periods following a Nonpayment on the Series K Preferred Stock and on any dividend parity stock entitled to noncumulative dividends and has paid cumulative dividends in full on any dividend parity stock entitled to cumulative dividends, then the right of the Holders to elect the Preferred Stock Directors will cease (but subject always to the same provisions for the vesting of the special voting rights in the case of any similar non-payment of dividends in respect of future Dividend Periods) (the time of such cessation, the “Preferred Stock Director Termination Date”). Upon a Preferred Stock Director Termination Date, the terms of office of the Preferred Stock Directors will immediately terminate, the persons then serving as Preferred Stock Directors shall immediately cease to be qualified to hold office as Preferred Stock Directors, the Preferred Stock Directors shall cease to be directors of the Company and the number of directors constituting the Board of Directors shall be automatically reduced, without any action by the Board of Directors or the stockholders of the Company, by the number of Preferred Stock Directors authorized immediately prior to such termination. Any Preferred Stock Director may be removed at any time without cause by the holders of a majority of the voting power of outstanding shares of the capital stock then entitled to vote in the election of Preferred Stock Directors, voting together as a single class (with such voting power measured based on the voting power to elect Preferred Stock Directors).
(c) Senior Issuances; Adverse Changes. So long as any shares of Series K Preferred Stock are outstanding, but subject to the final paragraph of this Section 7(c), in addition to any other vote or consent of holders of the Company’s capital stock required by Delaware law, the vote or consent of the holders of at least two-thirds of the voting power of the Series K Preferred Stock and the holders of any other preferred stock entitled to vote thereon, voting together as a single class, given in person or by proxy at an annual or special meeting of stockholders, or given in writing without a meeting, will be necessary for effecting or validating any of the following actions, whether or not such approval is required by Delaware law:
(i) any amendment, alteration or repeal of any provision of the Company’s certificate of incorporation (including the certificate of designations creating the Series K Preferred Stock) or the Company’s by-laws that would alter or change the voting powers, preferences, economic rights or special rights of the Series K Preferred Stock so as to affect them adversely;
(ii) any amendment or alteration of the Company’s certificate of incorporation to authorize or create, or increase the authorized amount of, any shares of, or any securities
convertible into shares of, any class or series of the Company's capital stock ranking prior to the Series K Preferred Stock in the payment of dividends or in the distribution of assets on any liquidation, dissolution, or winding up of the Company; or
(iii) the consummation of a binding share exchange or reclassification involving the Series K Preferred Stock or a merger or consolidation of the Company with another entity, except that holders of Series K Preferred Stock will have no right to vote under this provision or otherwise under Delaware law if in each case (i) the Series K Preferred Stock remains outstanding or, in the case of any such merger or consolidation with respect to which the Company is not the surviving or resulting entity, is converted into or exchanged for preferred securities of the surviving or resulting entity or its ultimate parent, that is an entity organized and existing under the laws of the United States of America, any state thereof or the District of Columbia and that is a corporation for U.S. federal income tax purposes (or if such entity is not a corporation, the Company having received an opinion of nationally recognized counsel experienced in such matters to the effect that Holders will be subject to tax for U.S. federal income tax purposes with respect to such new preferred securities after such merger or consolidation in the same amount, at the same time and otherwise in the same manner as would have been the case under the Series K Preferred Stock prior to such merger or consolidation), and (ii) such Series K Preferred Stock remaining outstanding or such preferred securities, as the case may be, have such rights, preferences, privileges and voting powers, taken as a whole, as are not materially less favorable to the holders thereof than the rights, preferences, privileges and voting powers of the Series K Preferred Stock, taken as a whole;
provided, however, that, for the avoidance of doubt, any increase in the amount of the authorized or issued Series K Preferred Stock or authorized preferred stock or any securities convertible into preferred stock or the creation and issuance, or an increase in the authorized or issued amount, of other series of preferred stock or any securities convertible into preferred stock ranking equally with and/or junior to the Series K Preferred Stock with respect to the payment of dividends (whether such dividends are cumulative or noncumulative) and/or the distribution of assets upon the Company’s liquidation, dissolution or winding up will not be deemed to adversely affect the voting powers, preferences or special rights of the Series K Preferred Stock, and no stockholder will have the right to vote on such an increase, creation or issuance by reason of this Section 7.
If any amendment, alteration, repeal, share exchange, reclassification, merger or consolidation specified in this Section 7(c) would adversely affect the Series K Preferred Stock but not all series of preferred stock of the Company, then only such series of preferred stock as are adversely affected by and entitled to vote on the matter shall vote on the matter together with the Series K Preferred Stock as a single class (in lieu of all other series of preferred stock) for purposes of the vote or consent required by this Section 7(c).
(d) No Vote if Redemption. No vote or consent of the Holders shall be required pursuant to Section 7(b) or 7(c) if, at or prior to the time when the act with respect to such vote or consent would otherwise be required shall be effected, the Company shall have redeemed or
shall have called for redemption all outstanding shares of Series K Preferred Stock, with proper notice and sufficient funds having been set aside for such redemption, in each case pursuant to Section 6 above.
Section 8. Preemption and Conversion Rights.
The Holders shall not have any preemptive rights or conversion rights as a result of the terms hereof.
Section 9. Rank.
For the avoidance of doubt, the Board of Directors or any duly authorized committee thereof may, without the vote of the Holders, authorize and issue additional shares of Junior Stock or shares of any class or series of stock of the Company now existing or hereafter authorized that ranks equally with the Series K Preferred Stock in the payment of dividends or in the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the Company.
Section 10. Reacquired Shares.
The Board of Directors shall take such actions as are necessary to cause the shares of Series K Preferred Stock which have been redeemed or otherwise purchased or acquired by the Company to be retired and restored to the status of authorized but unissued shares of preferred stock without designation as to series.
Section 11. No Sinking Fund.
Shares of Series K Preferred Stock are not subject to the operation of a sinking fund.
Section 12. Transfer Agent, Calculation Agent, Registrar and Paying Agent.
The duly appointed Transfer Agent, Calculation Agent, Registrar and paying agent for the Series K Preferred Stock shall be Computershare Trust Company, N.A. The Company may, in its sole discretion, remove the Transfer Agent in accordance with the agreement between the Company and the Transfer Agent; provided, however, that the Company shall appoint a successor transfer agent who shall accept such appointment prior to the effectiveness of such removal. Upon any such removal or appointment, the Company shall send notice thereof by first-class mail, postage prepaid, to the Holders.
Section 13. Replacement Certificates for Mutilated, Destroyed, Stolen and Lost Certificates.
If physical certificates are issued, the Company shall replace any mutilated certificate at the Holder’s expense upon surrender of that certificate to the Transfer Agent. The Company shall replace certificates that become destroyed, stolen or lost at the Holder’s expense upon delivery to the Company and the Transfer Agent of satisfactory evidence that the certificate has been destroyed, stolen or lost, together with any indemnity that may be required by the Transfer Agent and the Company.
Section 14. Form.
(a) Series K Preferred Stock Certificates. Series K Preferred Stock shall be issued in certificated form in substantially the form attached hereto as Exhibit A (each, a “Series K Preferred Stock Certificate”). Exhibit A is hereby incorporated in and expressly made a part of this Certificate of Designations. The Series K Preferred Stock Certificates may have notations, legends or endorsements required by law, stock exchange rules, agreements to which the Company is subject, if any, or usage (provided that any such notation, legend or endorsement is in a form acceptable to the Company).
(b) Signature. Two Officers shall sign any Series K Preferred Stock Certificate for the Company, in accordance with the Company’s by-laws and applicable law, by manual or facsimile signature. If an Officer whose signature is on a Series K Preferred Stock Certificate no longer holds that office at the time the Transfer Agent countersigned the Series K Preferred Stock Certificate, such Series K Preferred Stock Certificate shall be valid nevertheless. A Series K Preferred Stock Certificate shall not be valid until an authorized signatory of the Transfer Agent manually countersigns such Series K Preferred Stock Certificate. Each Series K Preferred Stock Certificate shall be dated the date of its countersignature.
Section 15. Taxes.
(a) Transfer Taxes. The Company shall pay any and all stock transfer, documentary, stamp and similar taxes that may be payable in respect of any issuance or delivery of shares of Series K Preferred Stock. The Company shall not, however, be required to pay any such tax that may be payable in respect of any transfer involved in the issuance or delivery of shares of Series K Preferred Stock, in a name other than that in which the shares of Series K Preferred Stock were registered, or in respect of any payment to any Person other than a payment to the registered holder thereof, and shall not be required to make any such issuance, delivery or payment unless and until the Person otherwise entitled to such issuance, delivery or payment has paid to the Company the amount of any such tax or has established, to the satisfaction of the Company, that such tax has been paid or is not payable.
(b) Withholding. All payments and distributions (or deemed distributions) on the shares of Series K Preferred Stock shall be subject to withholding and backup withholding of tax to the extent required by law, subject to applicable exemptions, and amounts withheld, if any, shall be treated as received by Holders.
Section 16. Notices.
All notices referred to herein shall be in writing, and, unless otherwise specified herein, all notices hereunder shall be deemed to have been given upon the earlier of receipt thereof or three Business Days after the mailing thereof if sent by registered or certified mail (unless first class mail shall be specifically permitted for such notice under the terms of this Certificate of Designations) with postage prepaid, addressed: (i) if to the Company, to its office at 399 Park Avenue, New York, New York 10043 (Attention: Corporate Secretary) or to the Transfer Agent at its office at 250 Royall Street, Canton, Massachusetts 02021, or other agent of the Company designated as permitted by this Certificate of Designations, or (ii) if to any Holder, to such Holder at the address of such Holder as listed in the stock record books of the Company (which may include the records of the Transfer Agent) or (iii) to such other address as the Company or any such Holder, as the case may be, shall have designated by notice similarly given.
Section 17. Other Rights Disclaimed.
The shares of Series K Preferred Stock have no voting powers, preferences or relative, participating, optional or other special rights, or qualifications, limitations or restrictions thereof, other than as set forth herein or in the Certificate of Incorporation of the Company.
IN WITNESS WHEREOF, this Certificate of Designations as has been executed on behalf of the Company by its Chief Accounting Officer this 30th day of October, 2013.
CITIGROUP INC.
By: _/c/ Jeffrey R. Walsh_________________________ Name: Jeffrey R. Walsh Title: Chief Accounting Officer
Exhibit A
FORM OF 6.875% FIXED RATE / FLOATING RATE NONCUMULATIVE PREFERRED STOCK, SERIES K
Certificate Number_______ Number of Shares of Series K Preferred Stock______
CUSIP NO.:
CITIGROUP INC.
6.875% Fixed Rate / Floating Rate Noncumulative Preferred Stock, Series K
(par value $1.00 per share) (liquidation preference $25,000 per share)
Citigroup Inc., a Delaware corporation (the “Company”), hereby certifies that [ ] (the “Holder”) is the registered owner of [ ] fully paid and non-assessable shares of the Company’s designated 6.875% Fixed Rate / Floating Rate Noncumulative Preferred Stock, Series K, with a par value of $1.00 per share and a liquidation preference of $25,000 per share (the “Series K Preferred Stock”). The shares of Series K Preferred Stock are transferable on the books and records of the Registrar, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer. The designations, rights, privileges, restrictions, preferences and other terms and provisions of the Series K Preferred Stock represented hereby are and shall in all respects be subject to the provisions of the Certificate of Designations dated October 30, 2013 as the same may be amended from time to time (the “Certificate of Designations”). Capitalized terms used herein but not defined shall have the meaning given them in the Certificate of Designations. The Company will provide a copy of the Certificate of Designations to a Holder without charge upon written request to the Company at its principal place of business.
Reference is hereby made to select provisions of the Series K Preferred Stock set forth on the reverse hereof, and to the Certificate of Designations, which select provisions and the Certificate of Designations shall for all purposes have the same effect as if set forth at this place.
Upon receipt of this certificate, the Holder is bound by the Certificate of Designations and is entitled to the benefits thereunder.
Unless the Registrar has properly countersigned, these shares of Series K Preferred Stock shall not be entitled to any benefit under the Certificate of Designations or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, this certificate has been executed on behalf of the Company by its [Title] and by its [Title] this __ day of ________, ________.
CITIGROUP INC.
By: _______________________________________ Name: Title:
By: _______________________________________ Name: Title:
REGISTRAR’S COUNTERSIGNATURE
These are shares of Series K Preferred Stock referred to in the within-mentioned Certificate of Designations.
Dated:
COMPUTERSHARE TRUST COMPANY, N.A., as Registrar
By: _______________________________________ Name: Title:
REVERSE OF CERTIFICATE
Dividends on each share of Series K Preferred Stock shall be payable at the rate provided in the Certificate of Designations.
The shares of Series K Preferred Stock shall be redeemable at the option of the Company in the manner and in accordance with the terms set forth in the Certificate of Designations.
The Company shall furnish without charge to each holder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class or series of share capital issued by the Company and the qualifications, limitations or restrictions of such preferences and/or rights.
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers the shares of Series K Preferred Stock evidenced hereby to:
___________________________________________________
___________________________________________________
(Insert assignee’s social security or taxpayer identification number, if any)
___________________________________________________
___________________________________________________
(Insert address and zip code of assignee)
and irrevocably appoints:
___________________________________________________
___________________________________________________
as agent to transfer the shares of Series K Preferred Stock evidenced hereby on the books of the Transfer Agent. The agent may substitute another to act for him or her.
Date:
Signature:
___________________________________________________
(Sign exactly as your name appears on the other side of this Certificate)
Signature Guarantee: ___________________________________________________
(Signature must be guaranteed by an “eligible guarantor institution” that is a bank, stockbroker, savings and loan association or credit union meeting the requirements of the Transfer Agent, which requirements include membership or participation in the Securities Transfer Agents Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Transfer Agent in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.)
CORRECTED CERTIFICATE OF DESIGNATIONS
OF
6.300% FIXED RATE / FLOATING RATE NONCUMULATIVE PREFERRED STOCK SERIES M
OF
CITIGROUP INC.
______________________________
pursuant to Sections 103(f) and 151 of the
General Corporation Law of the State of Delaware
______________________________
Citigroup Inc., a Delaware corporation (the “Company”), hereby certifies that:
On April 29, 2014, the Company filed with the Secretary of State of the State of Delaware the Certificate of Designations of 6.300% Fixed Rate / Floating Rate Noncumulative Preferred Stock, Series M (the “Certificate”), which was an inaccurate record of the corporate action referred to therein in that Section 4(a) of the Certificate omitted the interest payment dates for the floating rate interest period and contained similar typographical errors. The Certificate is hereby corrected to read, in its entirety, as set forth below:
1. The Restated Certificate of Incorporation of the Company (as amended through the date hereof, the “Certificate of Incorporation”) fixes the total number of shares of all classes of capital stock that the Company shall have the authority to issue at six billion (6,000,000,000) shares of common stock, par value $0.01 per share, and thirty million (30,000,000) shares of preferred stock, par value $1.00 per share.
2. The Certificate of Incorporation expressly grants to the Board of Directors of the Company (the “Board of Directors”) authority to provide for the issuance of the shares of preferred stock in series, and to establish from time to time the number of shares to be included in each such series and to fix the designation, powers, preferences and rights of the shares of each such series and the qualifications, limitations or restrictions thereof.
3. Pursuant to the authority conferred upon a preferred stock committee (the “Preferred Stock Committee”) by the Board of Directors, the Preferred Stock Committee, by action duly taken on April 23, 2014, adopted resolutions (i) authorizing the issuance and sale of up to 70,000 shares of the Company’s preferred stock and (ii) approving this final form of Certificate of Designations of 6.300% Fixed Rate / Floating Rate Noncumulative Preferred Stock, Series M (the “Series M Preferred Stock”) establishing the number of shares to be included in this Series M Preferred Stock and fixing the designation, powers, preferences and
rights of the shares of this Series M Preferred Stock and the qualifications, limitations or restrictions thereof as follows:
Section 1. Designation.
The designation of the series of preferred stock shall be “6.300% Fixed Rate / Floating Rate Noncumulative Preferred Stock, Series M” (the “Series M Preferred Stock”). Each share of Series M Preferred Stock shall be identical in all respects to every other share of Series M Preferred Stock.
Section 2. Number of Shares.
The number of authorized shares of Series M Preferred Stock shall be 70,000. That number from time to time may be increased (but not in excess of the total number of authorized shares of preferred stock) or decreased (but not below the number of shares of Series M Preferred Stock then outstanding) by further resolution duly adopted by the Board of Directors, the Preferred Stock Committee or any other duly authorized committee thereof and by the filing of a certificate pursuant to the provisions of the General Corporation Law of the State of Delaware stating that such increase or reduction, as the case may be, has been so authorized. The Company shall have the authority to issue fractional shares of Series M Preferred Stock.
Section 3. Definitions. As used herein with respect to Series M Preferred Stock:
“Appropriate Federal Banking Agency” means the “appropriate federal banking agency” with respect to the Company as that term is defined in Section 3(q) of the Federal Deposit Insurance Act of 1950, as amended, or any successor provision.
“Board of Directors” has the meaning set forth in the recitals above.
“Business Day” means any weekday that is not a legal holiday in New York City and is not a day on which banking institutions in New York City are authorized or required by law or regulation to be closed.
“Calculation Agent” means the Transfer Agent acting in its capacity as calculation agent for the Series M Preferred Stock, and its successors and assigns.
“Common Stock” means the common stock of the Company, par value $0.01 per share, or any other shares of the capital stock of the Company into which such shares of common stock shall be reclassified or changed.
“Depositary” means DTC or its nominee or any successor depositary appointed by the Company.
“Dividend Payment Date” shall have the meaning set forth in Section 4(a) hereof.
“Dividend Period” shall have the meaning set forth in Section 4(a) hereof.
“Dividend Record Date” shall have the meaning set forth in Section 4(a) hereof.
“DTC” means The Depository Trust Company.
“Holder” means the Person in whose name the shares of the Series M Preferred Stock are registered, which may be treated by the Company, Calculation Agent, Transfer Agent, Registrar and paying agent as the absolute owner of the shares of Series M Preferred Stock for the purpose of making payment and for all other purposes.
“Junior Stock” means the Common Stock and any other class or series of stock of the
Company now existing or hereafter authorized over which Series M Preferred Stock has
preference or priority in the payment of dividends or in the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the Company.
“LIBOR Determination Date” means the second London Banking Day immediately preceding the first day of the relevant Dividend Period.
“London Banking Day” means any day on which commercial banks are open for general business (including dealings in deposits in United States dollars) in London.
“Nonpayment” shall have the meaning set forth in Section 7(b)(i) hereof.
“Officer” means the Chief Executive Officer, the Chairman, the Chief Administrative Officer, any Vice Chairman, the Chief Financial Officer, the Controller, the Chief Accounting Officer, the Treasurer, any Deputy Treasurer, any Assistant Treasurer, any Vice President, the General Counsel and Corporate Secretary and any Assistant Secretary of the Company.
“Person” means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint-stock company, limited liability company, trust, or other entity.
“Preferred Stock Director” shall have the meaning set forth in Section 7(b)(i) hereof.
“Preferred Stock Director Termination Date” shall have the meaning set forth in Section 7(b)(iv) hereof.
“Registrar” means the Transfer Agent acting in its capacity as registrar for the Series M Preferred Stock, and its successors and assigns.
“Regulatory Capital Event” means the good faith determination by the Company that, as a result of (i) any amendment to, clarification of, or change in, the laws or regulations of the United States or any political subdivision of or in the United States that is enacted or becomes effective after the initial issuance of any share of the Series M Preferred Stock, (ii) any proposed change in those laws or regulations that is announced or becomes effective after the initial issuance of any share of the Series M Preferred Stock, or (iii) any official administrative decision or judicial decision or administrative action or other official pronouncement interpreting or applying those laws or regulations or policies with respect thereto that is announced after the initial issuance of any share of the Series M Preferred Stock, there is more than an insubstantial risk that the Company will not be entitled to treat the full liquidation preference amount of $25,000 per share of the Series M Preferred Stock then outstanding as “tier 1 capital” (or its equivalent) for purposes of the capital adequacy guidelines of the Federal Reserve (or, as and if applicable, the capital adequacy guidelines or regulations of any successor Appropriate Federal
Banking Agency) as then in effect and applicable, for so long as any share of the Series M Preferred Stock is outstanding.
“Reuters LIBOR01” means the display designated on the Reuters 3000 Xtra Service on page LIBOR01 Page (or such other page as may replace “Reuters LIBOR01” page on the service or such other service as may be nominated by the British Bankers’ Association or other administrator of LIBOR for the purpose of displaying London interbank offered rates for United States dollar deposits or loans).
“Series M Preferred Stock” shall have the meaning set forth in Section 1 hereof.
“Series M Preferred Stock Certificate” shall have the meaning set forth in Section 14(a) hereof.
“Three-month LIBOR” means the rate (expressed as a percentage per annum) for deposits in United States dollars for a three-month period commencing on the first day of a Dividend Period that appears on the Reuters LIBOR01 page as of 11:00 a.m. (London time) on the LIBOR Determination Date for that Dividend Period. If such rate does not appear on the Reuters LIBOR01 page, Three-month LIBOR will be determined on the basis of the rates at which deposits in United States dollars for a three-month period commencing on the first day of that Dividend Period and in a principal amount of not less than $1 million are offered to prime banks in the London interbank market by four major banks in the London interbank market selected by the Calculation Agent (after consultation with the Company), at approximately 11:00 a.m., London time, on the LIBOR Determination Date for that Dividend Period. The Calculation Agent will request the principal London office of each of such banks to provide a quotation of its rate. If at least two such quotations are provided, Three-month LIBOR with respect to that Dividend Period will be the arithmetic mean (rounded upward if necessary to the nearest whole multiple of 0.00001%) of such quotations. If fewer than two quotations are provided, Three-month LIBOR with respect to that Dividend Period will be the arithmetic mean (rounded upward if necessary to the nearest whole multiple of 0.00001%) of the rates quoted by three major banks in New York City selected by the Calculation Agent (after consultation with the Company), at approximately 11:00 a.m., New York City time, on the LIBOR Determination Date for that Dividend Period for loans in United States dollars to leading European banks for a three-month period commencing on the first day of that Dividend Period and in a principal amount of not less than $1 million. However, if fewer than three banks selected by the Calculation Agent to provide quotations are quoting as described above, Three-month LIBOR for that Dividend Period will be the same Three-month LIBOR as determined for the previous Dividend Period or, in the case of the Dividend Period beginning on May 15, 2024, 0.2288%. The determination of Three-month LIBOR for each relevant Dividend Period by the Calculation Agent will (in the absence of manifest error) be final and binding.
“Transfer Agent” means Computershare Trust Company, N.A., a federally chartered national association, acting as Transfer Agent, Calculation Agent, Registrar and paying agent for the Series M Preferred Stock, and its successors and assigns.
“Trust” shall have the meaning set forth in Section 6(d).
Section 4. Dividends.
(a) Rate. Holders shall be entitled to receive, when, as and if declared by the Board of Directors or any duly authorized committee thereof, but only out of funds legally available therefor, noncumulative cash dividends on each share of Series M Preferred Stock in the amounts specified below in this Section 4, and no more, payable (i) semiannually in arrears on each May 15 and November 15 (each, a “Dividend Payment Date”), beginning November 15, 2014, from and including the date of issuance to, but excluding, May 15, 2024; provided, however, if any such day is not a Business Day, then payment of any dividend otherwise payable on that date will be made on the next succeeding day that is a Business Day, without any interest or other payment in respect of such postponement, and (ii) quarterly in arrears on each February 15, May 15, August 15 and November 15, beginning August 15, 2024, from and including May 15, 2024; provided, however, if any such day is not a Business Day, then payment of any dividend otherwise payable on that date will be made on the next succeeding day that is a Business Day, except if that day falls in the next calendar month, in which case, the payment of any dividend otherwise payable will be made on the immediately preceding Business Day, with dividends accruing to the actual payment date (each such day on which dividends are payable for any Dividend Period (as defined below) after the Dividend Period to but excluding May 15, 2024, a “Dividend Payment Date”). The period from and including the date of issuance of the Series M Preferred Stock or any Dividend Payment Date to, but excluding, the next Dividend Payment Date is a “Dividend Period.” Dividends on each share of Series M Preferred Stock will accrue on the liquidation preference of $25,000 per share at a rate per annum equal to (i) 6.300%, for each Dividend Period from and including the date of issuance to, but excluding, May 15, 2024 and (ii) Three-month LIBOR plus 3.423%, for each Dividend Period from and including May 15, 2024. The record date for payment of dividends on the Series M Preferred Stock will be the record date fixed by the Board of Directors or any other duly authorized committee thereof that is not more than 30 nor less than 10 days prior to such Dividend Payment Date (each, a “Dividend Record Date”). Any such day that is a Dividend Record Date will be a Dividend Record Date whether or not such day is a Business Day. The amount of dividends payable on or prior to May 15, 2024 will be computed on the basis of a 360-day year of twelve 30-day months. The amount of dividends payable after May 15, 2024 will be computed on the basis of a 360-day year and the actual number of days elapsed.
(b) Noncumulative Dividends. If the Board of Directors or any duly authorized committee thereof does not declare a dividend on the Series M Preferred Stock for any Dividend Period prior to the related Dividend Payment Date, that dividend will not accrue, and the Company will have no obligation to pay, and Holders shall have no right to receive, a dividend for that Dividend Period on the related Dividend Payment Date or at any future time, whether or not dividends on the Series M Preferred Stock or any other series of preferred stock or common stock are declared for any subsequent period. References herein to the “accrual” of dividends refer only to the determination of the amount of such dividend and do not imply that any right to a dividend arises prior to the date on which a dividend is declared.
(c) Priority of Dividends. So long as any share of Series M Preferred Stock remains outstanding, unless as to a Dividend Payment Date full dividends on all outstanding shares of the Series M Preferred Stock have been declared and paid or declared and a sum sufficient for the payment of those dividends has been set aside for the Dividend Period then ending, the Company will not, and will cause its subsidiaries not to, during the next succeeding Dividend Period that commences on such Dividend Payment Date, declare or pay any dividend on, make any distributions relating to, or redeem, purchase, acquire or make a liquidation payment relating to, any Junior Stock, or make any guarantee payment with respect thereto, other than:
(i) purchases, redemptions or other acquisitions of shares of Junior Stock in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of employees, officers, directors or consultants;
(ii) purchases of shares of Common Stock pursuant to a contractually binding requirement to buy stock existing prior to the commencement of the then-current Dividend Period, including under a contractually binding stock repurchase plan;
(iii) as a result of an exchange or conversion of any class or series of Junior Stock for any other class or series of Junior Stock;
(iv) the purchase of fractional interests in shares of Junior Stock pursuant to the conversion or exchange provisions of such Junior Stock or the security being converted or exchanged;
(v) the purchase of Junior Stock by an investment banking subsidiary of the Company in connection with the distribution thereof; or
(vi) the purchase of Junior Stock by any investment banking subsidiary of the Company in connection with market-making or other secondary market activities in the ordinary course of the business of such subsidiary.
The restrictions set forth in the preceding provisions of this Section 4(c) shall not apply to any Junior Stock dividends paid by the Company where the dividend is in the form of the same stock (or the right to buy the same stock) as that on which the dividend is being paid.
Except as provided below, for so long as any share of Series M Preferred Stock remains outstanding, if dividends are not declared and paid in full upon the shares of Series M Preferred Stock and any class or series of stock of the Company now existing or hereafter authorized that ranks equally with the Series M Preferred Stock in the payment of dividends, all dividends declared upon shares of Series M Preferred Stock and such other stock will be declared on a proportional basis so that the amount of dividends declared per share will bear to each other the same ratio that accrued dividends for the then-current Dividend Period per share of Series M Preferred Stock and accrued dividends for the then-current Dividend Period per share of such other stock (including, in the case of any such other stock that bears cumulative dividends, all accrued and unpaid dividends) bear to each other.
Subject to the foregoing, and not otherwise, such dividends payable in cash, stock or otherwise, as may be determined by the Board of Directors or any duly authorized committee thereof, may be declared and paid on any other class or series of stock of the Company from time to time out of any funds legally available for such payment, and Holders will not be entitled to participate in those dividends.
Section 5. Liquidation Rights.
(a) Liquidation. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company, Holders shall be entitled, out of funds legally available therefor, before any distribution or payment may be made by the Company or set aside for the holders of any Junior Stock and subject to the rights of the holders of any class or series of stock ranking senior to or on parity with Series M Preferred Stock upon liquidation and the rights of the Company’s depositors and other creditors, to receive in full a liquidating distribution in the amount of the liquidation preference of $25,000 per share (the “Series M Liquidation Preference”), plus any accrued dividends thereon from the last Dividend Payment Date to, but excluding, the date of the liquidation, dissolution or winding up if and to the extent declared but not yet paid. Holders shall not be entitled to any further payments in the event of any such voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company other than what is expressly provided for in this Section 5.
(b) Partial Payment. If the assets of the Company are not sufficient to pay in full the aforesaid liquidation distributions to the Holders and any liquidation distributions owed to holders of any class or series of stock of the Company ranking equally with the Series M Preferred Stock in the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the Company, the amounts paid to the Holders and to the holders of all such equally ranking stock shall be pro rata in accordance with the respective aggregate liquidating distributions to which they would otherwise be entitled.
(c) Merger, Consolidation and Sale of Assets Not Liquidation. For purposes of this Section 5, the sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the property and assets of the Company shall not be deemed a voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, nor shall the merger, consolidation or any other business combination transaction of the Company into or with any other corporation or Person or the merger, consolidation or any other business combination transaction of any other corporation or Person into or with the Company be deemed to be a voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company.
Section 6. Redemption.
(a) Optional Redemption. The Company, at the option of its Board of Directors or any duly authorized committee thereof, may redeem out of funds legally available therefor, (i) in whole or in part, from time to time, the shares of Series M Preferred Stock at the time outstanding, on any Dividend Payment Date on or after May 15, 2024, or (ii) in whole but not in part at any time within 90 days following a Regulatory Capital Event, in each case at a redemption price equal to $25,000 per share plus any declared and unpaid dividends, without accumulation of any undeclared dividends, to but excluding the redemption date, upon notice given as provided in Section 6(b) below.
(b) Notice of Redemption. Notice of every redemption of shares of Series M Preferred Stock shall be mailed by first class mail, postage prepaid, addressed to the Holders of such shares to be redeemed at their respective last addresses appearing on the stock register of the Company. Such mailing shall be at least 30 days and not more than 60 days before the date fixed for redemption. Any notice mailed as provided in this Section 6(b) shall be conclusively presumed to have been duly given, whether or not the Holder receives such notice, but failure duly to give such notice by mail, or any defect in such notice or in the mailing thereof, to any Holder of shares of Series M Preferred Stock designated for redemption shall not affect the validity of the proceedings for the redemption of any other shares of Series M Preferred Stock. Each notice shall state:
(i) the redemption date;
(ii) the total number of shares of Series M Preferred Stock to be redeemed and, if fewer than all the shares of a Holder are to be redeemed, the number of such shares to be redeemed;
(iii) the redemption price;
(iv) the place or places where the certificates for such shares are to be surrendered for payment of the redemption price, if applicable; and
(v) that dividends on the shares to be redeemed will cease to accrue on the redemption date.
Notwithstanding the foregoing, if the certificates evidencing the shares of Series M Preferred Stock are held of record by a depositary and any related depository shares are held of record by a Depositary or its nominee, the Company may give such notice in any manner permitted by the Depositary.
(c) Partial Redemption. In case of any redemption of only part of the shares of Series M Preferred Stock at the time outstanding, the shares of Series M Preferred Stock to be redeemed shall be selected (i) pro rata from the Holders in proportion to the number of shares of Series M Preferred Stock held by such Holders, (ii) by lot or (iii) in such other manner as the Board of
Directors or any duly authorized committee thereof may determine, in its sole discretion, to be fair and equitable; provided, however, that if for so long as the Series M Preferred Stock or depositary shares in respect thereof are listed on the New York Stock Exchange, the foregoing clause (iii) shall apply only if such method of selection is not then prohibited by any then applicable rule of the New York Stock Exchange or the New York Stock Exchange consents to or grants a waiver or exemption from such rule. Subject to the provisions of this Section 6, the Board of Directors or any duly authorized committee thereof shall have full power and authority to prescribe the terms and conditions upon which shares of Series M Preferred Stock shall be redeemed from time to time.
(d) Effectiveness of Redemption. If notice of redemption has been duly given and if on or before the redemption date specified in the notice all funds necessary for the redemption have been set aside by the Company, separate and apart from its other assets, for the pro rata benefit of the Holders of the shares called for redemption, so as to be and continue to be available therefor, or deposited by the Company with a bank or trust company selected by the Board of Directors or any duly authorized committee thereof (the “Trust”) in trust for the pro rata benefit of the Holders of the shares called for redemption, then, notwithstanding that any certificate for any share so called for redemption has not been surrendered for cancellation, on and after the redemption date all shares so called for redemption shall cease to be outstanding, all dividends with respect to such shares shall cease to accrue on such redemption date, and all rights with respect to such shares shall forthwith on such redemption date cease and terminate, except only the right of the Holders thereof to receive the amount payable on such redemption from the Trust at any time after the redemption date from the funds so deposited, without interest. The Company shall be entitled to receive, from time to time, from the Trust any interest accrued on such funds, and the Holders of any shares called for redemption shall have no claim to any such interest. Any funds so deposited and unclaimed at the end of three years from the redemption date shall, to the extent permitted by law, be released or repaid to the Company, and in the event of such repayment to the Company, the Holders of the shares so called for redemption shall be deemed to be unsecured creditors of the Company for an amount equivalent to the amount deposited as stated above for the redemption of such shares and so repaid to the Company, but shall in no event be entitled to any interest.
Section 7. Voting Rights.
(a) General. The Holders shall not be entitled to vote on any matter except as set forth in Section 7(b) below or as required by the Delaware General Corporation Law.
(b) Special Voting Right.
(i) Voting Right. If and whenever dividends on the Series M Preferred Stock or any other class or series of preferred stock that ranks on parity with Series M Preferred Stock as to payment of dividends and upon which voting rights equivalent to those granted by this Section 7(b)(i) have been conferred and are exercisable (any such class or series being referred to herein as “dividend parity stock”) have not been paid in an
aggregate amount equal, as to any class or series, to at least three semi-annual or six quarterly Dividend Periods, as applicable, (whether consecutive or not) (a “Nonpayment”), the authorized number of directors constituting the Board of Directors shall be increased by two, and the Holders, together with holders of dividend parity stock, shall have the right, voting separately as a single class without regard to class or series (and with voting rights allocated pro rata based on the liquidation preference of each such class or series), to the exclusion of the holders of Common Stock, to elect two directors of the Company to fill such newly created directorships (and to fill any vacancies in the terms of such directorships), provided that it shall be a qualification for election of any such director that the election of such director shall not cause the Company to violate the corporate governance requirements of the New York Stock Exchange (or other exchange on which the Company’s securities may be listed) that listed companies must have a majority of independent directors and further provided that the Board of Directors shall at no time include more than two such directors. Each such director elected by the Holders together with holders of dividend parity stock is a “Preferred Stock Director.”
(ii) Election. The election of the Preferred Stock Directors will take place at any annual meeting of stockholders or any special meeting of the Holders and any dividend parity stock, called as provided herein. At any time after the special voting power has vested pursuant to Section 7(b)(i) above, the secretary of the Company may, and upon the written request (addressed to the secretary at the Company’s principal office) of the holders of at least 20% of the voting power of the Series M Preferred Stock or the holders of at least 20% of the voting power of any series of dividend parity stock (with such voting power measured based on the voting power to elect Preferred Stock Directors), must (unless such request is received less than 90 days before the date fixed for the next annual or special meeting of the stockholders at which Preferred Stock Directors are to be elected, in which event such election shall be held at such next annual or special meeting of stockholders), call a special meeting of the holders of Series M Preferred Stock and any dividend parity stock for the purposes of electing Preferred Stock Directors. The Preferred Stock Directors shall each be entitled to one vote per director on any matter.
(iii) Notice of Special Meeting. Notice for a special meeting to elect Preferred Stock Directors will be given in a similar manner to that provided in the Company’s by-laws for a special meeting of the stockholders. If the secretary of the Company does not call a special meeting within 20 days after receipt of any such request, then any Holder may (at the expense of the Company) call such meeting, upon notice as provided in this Section 7(b)(iii), and for that purpose will have access to the stock register of the Company. The Preferred Stock Directors elected at any such special meeting and each Preferred Stock Director elected at a subsequent annual or special meeting of stockholders, will be elected for term expiring upon the earlier of the Preferred Stock Director Termination Date and the next annual meeting of stockholders following such Preferred Stock Director's election. In case any vacancy in the office of a Preferred Stock Director occurs (other than prior to the initial election of the Preferred Stock Directors), the vacancy may be filled by the Preferred Stock Director remaining in office, or if none remains in office, by a plurality of the votes cast by the holders of Series M Preferred
Stock and any dividend parity stock, voting together as a single class, and the Preferred Stock Director so appointed or elected to fill such vacancy shall serve for a term expiring at the next annual meeting of the stockholders. Preferred Stock Directors may only be elected by the holders of Series M Preferred Stock and dividend parity stock in accordance with this Section 7. If the holders of Series M Preferred Stock and such dividend parity stock fail to elect a sufficient number of directors to fill all directorships for which they are entitled to elect directors pursuant to this Section 7, then any directorship not so filled shall remain vacant until such time as the holders of Series M Preferred Stock and such dividend parity stock elect a person to fill such directorship in accordance with this Section 7, or such vacancy is otherwise filled in accordance with this Section 7; and no such directorship may be filled by stockholders of the Corporation other than in accordance with this Section 7.
(iv) Termination; Removal. Whenever the Company has paid noncumulative dividends in full for at least two consecutive semi-annual or four consecutive quarterly Dividend Periods following a Nonpayment on the Series M Preferred Stock and on any dividend parity stock entitled to noncumulative dividends and has paid cumulative dividends in full on any dividend parity stock entitled to cumulative dividends, then the right of the Holders to elect the Preferred Stock Directors will cease (but subject always to the same provisions for the vesting of the special voting rights in the case of any similar non-payment of dividends in respect of future Dividend Periods) (the time of such cessation, the “Preferred Stock Director Termination Date”). Upon a Preferred Stock Director Termination Date, the terms of office of the Preferred Stock Directors will immediately terminate, the persons then serving as Preferred Stock Directors shall immediately cease to be qualified to hold office as Preferred Stock Directors, the Preferred Stock Directors shall cease to be directors of the Company and the number of directors constituting the Board of Directors shall be automatically reduced, without any action by the Board of Directors or the stockholders of the Company, by the number of Preferred Stock Directors authorized immediately prior to such termination. Any Preferred Stock Director may be removed at any time without cause by the holders of a majority of the voting power of outstanding shares of the capital stock then entitled to vote in the election of Preferred Stock Directors, voting together as a single class (with such voting power measured based on the voting power to elect Preferred Stock Directors).
(c) Senior Issuances; Adverse Changes. So long as any shares of Series M Preferred Stock are outstanding, but subject to the final paragraph of this Section 7(c), in addition to any other vote or consent of holders of the Company’s capital stock required by Delaware law, the vote or consent of the holders of at least two-thirds of the voting power of the Series M Preferred Stock and the holders of any other preferred stock entitled to vote thereon, voting together as a single class, given in person or by proxy at an annual or special meeting of stockholders, or given in writing without a meeting, will be necessary for effecting or validating any of the following actions, whether or not such approval is required by Delaware law:
(i) any amendment, alteration or repeal of any provision of the Company’s certificate of incorporation (including the certificate of designations creating the Series M Preferred Stock) or the Company’s by-laws that would alter or change the voting powers, preferences, economic rights or special rights of the Series M Preferred Stock so as to affect them adversely;
(ii) any amendment or alteration of the Company’s certificate of incorporation to authorize or create, or increase the authorized amount of, any shares of, or any securities convertible into shares of, any class or series of the Company's capital stock ranking prior to the Series M Preferred Stock in the payment of dividends or in the distribution of assets on any liquidation, dissolution, or winding up of the Company; or
(iii) the consummation of a binding share exchange or reclassification involving the Series M Preferred Stock or a merger or consolidation of the Company with another entity, except that holders of Series M Preferred Stock will have no right to vote under this provision or otherwise under Delaware law if in each case (i) the Series M Preferred Stock remains outstanding or, in the case of any such merger or consolidation with respect to which the Company is not the surviving or resulting entity, is converted into or exchanged for preferred securities of the surviving or resulting entity or its ultimate parent, that is an entity organized and existing under the laws of the United States of America, any state thereof or the District of Columbia and that is a corporation for U.S. federal income tax purposes (or if such entity is not a corporation, the Company having received an opinion of nationally recognized counsel experienced in such matters to the effect that Holders will be subject to tax for U.S. federal income tax purposes with respect to such new preferred securities after such merger or consolidation in the same amount, at the same time and otherwise in the same manner as would have been the case under the Series M Preferred Stock prior to such merger or consolidation), and (ii) such Series M Preferred Stock remaining outstanding or such preferred securities, as the case may be, have such rights, preferences, privileges and voting powers, taken as a whole, as are not materially less favorable to the holders thereof than the rights, preferences, privileges and voting powers of the Series M Preferred Stock, taken as a whole;
provided, however, that, for the avoidance of doubt, any increase in the amount of the authorized or issued Series M Preferred Stock or authorized preferred stock or any securities convertible into preferred stock or the creation and issuance, or an increase in the authorized or issued amount, of other series of preferred stock or any securities convertible into preferred stock ranking equally with and/or junior to the Series M Preferred Stock with respect to the payment of dividends (whether such dividends are cumulative or noncumulative) and/or the distribution of assets upon the Company’s liquidation, dissolution or winding up will not be deemed to adversely affect the voting powers, preferences or special rights of the Series M Preferred Stock, and no stockholder will have the right to vote on such an increase, creation or issuance by reason of this Section 7.
If any amendment, alteration, repeal, share exchange, reclassification, merger or consolidation specified in this Section 7(c) would adversely affect the Series M Preferred Stock
but not all series of preferred stock of the Company, then only such series of preferred stock as are adversely affected by and entitled to vote on the matter shall vote on the matter together with the Series M Preferred Stock as a single class (in lieu of all other series of preferred stock) for purposes of the vote or consent required by this Section 7(c).
(d) No Vote if Redemption. No vote or consent of the Holders shall be required pursuant to Section 7(b) or 7(c) if, at or prior to the time when the act with respect to such vote or consent would otherwise be required shall be effected, the Company shall have redeemed or shall have called for redemption all outstanding shares of Series M Preferred Stock, with proper notice and sufficient funds having been set aside for such redemption, in each case pursuant to Section 6 above.
Section 8. Preemption and Conversion Rights.
The Holders shall not have any preemptive rights or conversion rights as a result of the terms hereof.
Section 9. Rank.
For the avoidance of doubt, the Board of Directors or any duly authorized committee thereof may, without the vote of the Holders, authorize and issue additional shares of Junior Stock or shares of any class or series of stock of the Company now existing or hereafter authorized that ranks equally with the Series M Preferred Stock in the payment of dividends or in the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the Company.
Section 10. Reacquired Shares.
The Board of Directors shall take such actions as are necessary to cause the shares of Series M Preferred Stock which have been redeemed or otherwise purchased or acquired by the Company to be retired and restored to the status of authorized but unissued shares of preferred stock without designation as to series.
Section 11. No Sinking Fund.
Shares of Series M Preferred Stock are not subject to the operation of a sinking fund.
Section 12. Transfer Agent, Calculation Agent, Registrar and Paying Agent.
The duly appointed Transfer Agent, Calculation Agent, Registrar and paying agent for the Series M Preferred Stock shall be Computershare Trust Company, N.A. The Company may, in its sole discretion, remove the Transfer Agent in accordance with the agreement between the Company and the Transfer Agent; provided, however, that the Company shall appoint a successor transfer agent who shall accept such appointment prior to the effectiveness of such removal. Upon any such removal or appointment, the Company shall send notice thereof by first-class mail, postage prepaid, to the Holders.
Section 13. Replacement Certificates for Mutilated, Destroyed, Stolen and Lost Certificates.
If physical certificates are issued, the Company shall replace any mutilated certificate at the Holder’s expense upon surrender of that certificate to the Transfer Agent. The Company shall replace certificates that become destroyed, stolen or lost at the Holder’s expense upon delivery to the Company and the Transfer Agent of satisfactory evidence that the certificate has been destroyed, stolen or lost, together with any indemnity that may be required by the Transfer Agent and the Company.
Section 14. Form.
(a) Series M Preferred Stock Certificates. Series M Preferred Stock shall be issued in certificated form in substantially the form attached hereto as Exhibit A (each, a “Series M Preferred Stock Certificate”). Exhibit A is hereby incorporated in and expressly made a part of this Certificate of Designations. The Series M Preferred Stock Certificates may have notations, legends or endorsements required by law, stock exchange rules, agreements to which the Company is subject, if any, or usage (provided that any such notation, legend or endorsement is in a form acceptable to the Company).
(b) Signature. Two Officers shall sign any Series M Preferred Stock Certificate for the Company, in accordance with the Company’s by-laws and applicable law, by manual or facsimile signature. If an Officer whose signature is on a Series M Preferred Stock Certificate no longer holds that office at the time the Transfer Agent countersigned the Series M Preferred Stock Certificate, such Series M Preferred Stock Certificate shall be valid nevertheless. A Series M Preferred Stock Certificate shall not be valid until an authorized signatory of the Transfer Agent manually countersigns such Series M Preferred Stock Certificate. Each Series M Preferred Stock Certificate shall be dated the date of its countersignature.
Section 15. Taxes.
(a) Transfer Taxes. The Company shall pay any and all stock transfer, documentary, stamp and similar taxes that may be payable in respect of any issuance or delivery of shares of Series M Preferred Stock. The Company shall not, however, be required to pay any such tax that may be payable in respect of any transfer involved in the issuance or delivery of shares of Series M Preferred Stock, in a name other than that in which the shares of Series M Preferred Stock were registered, or in respect of any payment to any Person other than a payment to the registered holder thereof, and shall not be required to make any such issuance, delivery or payment unless and until the Person otherwise entitled to such issuance, delivery or payment has paid to the Company the amount of any such tax or has established, to the satisfaction of the Company, that such tax has been paid or is not payable.
(b) Withholding. All payments and distributions (or deemed distributions) on the shares of Series M Preferred Stock shall be subject to withholding and backup withholding of tax to the extent required by law, subject to applicable exemptions, and amounts withheld, if any, shall be treated as received by Holders.
Section 16. Notices.
All notices referred to herein shall be in writing, and, unless otherwise specified herein, all notices hereunder shall be deemed to have been given upon the earlier of receipt thereof or three Business Days after the mailing thereof if sent by registered or certified mail (unless first class mail shall be specifically permitted for such notice under the terms of this Certificate of Designations) with postage prepaid, addressed: (i) if to the Company, to its office at 399 Park Avenue, New York, New York 10043 (Attention: Corporate Secretary) or to the Transfer Agent at its office at 250 Royall Street, Canton, Massachusetts 02021, or other agent of the Company designated as permitted by this Certificate of Designations, or (ii) if to any Holder, to such Holder at the address of such Holder as listed in the stock record books of the Company (which may include the records of the Transfer Agent) or (iii) to such other address as the Company or any such Holder, as the case may be, shall have designated by notice similarly given.
Section 17. Other Rights Disclaimed.
The shares of Series M Preferred Stock have no voting powers, preferences or relative, participating, optional or other special rights, or qualifications, limitations or restrictions thereof, other than as set forth herein or in the Certificate of Incorporation of the Company.
IN WITNESS WHEREOF, this Corrected Certificate of Designations has been executed on behalf of the Company by its Chief Accounting Officer this 30th day of July, 2014.
CITIGROUP INC.
By: /s/ Jeffrey R. Walsh
Name: Jeffrey R. Walsh
Title: Chief Accounting Officer
Exhibit A
FORM OF 6.300% FIXED RATE / FLOATING RATE NONCUMULATIVE PREFERRED STOCK, SERIES M
Certificate Number_______ Number of Shares of Series M Preferred Stock______
CUSIP NO.:
CITIGROUP INC.
6.300% Fixed Rate / Floating Rate Noncumulative Preferred Stock, Series M
(par value $1.00 per share) (liquidation preference $25,000 per share)
Citigroup Inc., a Delaware corporation (the “Company”), hereby certifies that [ ] (the “Holder”) is the registered owner of [ ] fully paid and non-assessable shares of the Company’s designated 6.300% Fixed Rate / Floating Rate Noncumulative Preferred Stock, Series M, with a par value of $1.00 per share and a liquidation preference of $25,000 per share (the “Series M Preferred Stock”). The shares of Series M Preferred Stock are transferable on the books and records of the Registrar, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer. The designations, rights, privileges, restrictions, preferences and other terms and provisions of the Series M Preferred Stock represented hereby are and shall in all respects be subject to the provisions of the Certificate of Designations dated April 29, 2014 as the same may be amended from time to time (the “Certificate of Designations”). Capitalized terms used herein but not defined shall have the meaning given them in the Certificate of Designations. The Company will provide a copy of the Certificate of Designations to a Holder without charge upon written request to the Company at its principal place of business.
Reference is hereby made to select provisions of the Series M Preferred Stock set forth on the reverse hereof, and to the Certificate of Designations, which select provisions and the Certificate of Designations shall for all purposes have the same effect as if set forth at this place.
Upon receipt of this certificate, the Holder is bound by the Certificate of Designations and is entitled to the benefits thereunder.
Unless the Registrar has properly countersigned, these shares of Series M Preferred Stock shall not be entitled to any benefit under the Certificate of Designations or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, this certificate has been executed on behalf of the Company by its [Title] and by its [Title] this __ day of ________, ________.
CITIGROUP INC.
By: _______________________________________ Name: Title:
By: _______________________________________ Name: Title:
REGISTRAR’S COUNTERSIGNATURE
These are shares of Series M Preferred Stock referred to in the within-mentioned Certificate of Designations.
Dated:
COMPUTERSHARE TRUST COMPANY, N.A., as Registrar
By: _______________________________________ Name: Title:
REVERSE OF CERTIFICATE
Dividends on each share of Series M Preferred Stock shall be payable at the rate provided in the Certificate of Designations.
The shares of Series M Preferred Stock shall be redeemable at the option of the Company in the manner and in accordance with the terms set forth in the Certificate of Designations.
The Company shall furnish without charge to each holder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class or series of share capital issued by the Company and the qualifications, limitations or restrictions of such preferences and/or rights.
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers the shares of Series M Preferred Stock evidenced hereby to:
___________________________________________________
___________________________________________________
(Insert assignee’s social security or taxpayer identification number, if any)
___________________________________________________
___________________________________________________
(Insert address and zip code of assignee)
and irrevocably appoints:
___________________________________________________
___________________________________________________
as agent to transfer the shares of Series M Preferred Stock evidenced hereby on the books of the Transfer Agent. The agent may substitute another to act for him or her.
Date:
Signature:
___________________________________________________
(Sign exactly as your name appears on the other side of this Certificate)
Signature Guarantee: ___________________________________________________
(Signature must be guaranteed by an “eligible guarantor institution” that is a bank, stockbroker, savings and loan association or credit union meeting the requirements of the Transfer Agent, which requirements include membership or participation in the Securities Transfer Agents Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Transfer Agent in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.)
CERTIFICATE OF DESIGNATIONS
OF
5.800% FIXED RATE / FLOATING RATE NONCUMULATIVE PREFERRED STOCK SERIES N
OF
CITIGROUP INC.
______________________________
pursuant to Sections 103(f) and 151 of the
General Corporation Law of the State of Delaware
______________________________
Citigroup Inc., a Delaware corporation (the “Company”), hereby certifies that:
1. The Restated Certificate of Incorporation of the Company (as amended through the date hereof, the “Certificate of Incorporation”) fixes the total number of shares of all classes of capital stock that the Company shall have the authority to issue at six billion (6,000,000,000) shares of common stock, par value $0.01 per share, and thirty million (30,000,000) shares of preferred stock, par value $1.00 per share.
2. The Certificate of Incorporation expressly grants to the Board of Directors of the Company (the “Board of Directors”) authority to provide for the issuance of the shares of preferred stock in series, and to establish from time to time the number of shares to be included in each such series and to fix the designation, powers, preferences and rights of the shares of each such series and the qualifications, limitations or restrictions thereof.
3. Pursuant to the authority conferred upon a preferred stock committee (the “Preferred Stock Committee”) by the Board of Directors, the Preferred Stock Committee, by action duly taken on October 22, 2014, adopted resolutions (i) authorizing the issuance and sale of up to 60,000 shares of the Company’s preferred stock and (ii) approving this final form of Certificate of Designations of 5.800% Fixed Rate / Floating Rate Noncumulative Preferred Stock, Series N (the “Series N Preferred Stock”) establishing the number of shares to be included in this Series N Preferred Stock and fixing the designation, powers, preferences and rights of the shares of this Series N Preferred Stock and the qualifications, limitations or restrictions thereof as follows:
Section 1. Designation.
The designation of the series of preferred stock shall be “5.800% Fixed Rate / Floating Rate Noncumulative Preferred Stock, Series N” (the “Series N Preferred Stock”). Each share of Series N Preferred Stock shall be identical in all respects to every other share of Series N Preferred Stock.
Section 2. Number of Shares.
The number of authorized shares of Series N Preferred Stock shall be 60,000. That number from time to time may be increased (but not in excess of the total number of authorized shares of preferred stock) or decreased (but not below the number of shares of Series N Preferred Stock then outstanding) by further resolution duly adopted by the Board of Directors, the Preferred Stock Committee or any other duly authorized committee thereof and by the filing of a certificate pursuant to the provisions of the General Corporation Law of the State of Delaware stating that such increase or reduction, as the case may be, has been so authorized. The Company shall have the authority to issue fractional shares of Series N Preferred Stock.
Section 3. Definitions. As used herein with respect to Series N Preferred Stock:
“Appropriate Federal Banking Agency” means the “appropriate federal banking agency” with respect to the Company as that term is defined in Section 3(q) of the Federal Deposit Insurance Act of 1950, as amended, or any successor provision.
“Board of Directors” has the meaning set forth in the recitals above.
“Business Day” means any weekday that is not a legal holiday in New York City and is not a day on which banking institutions in New York City are authorized or required by law or regulation to be closed.
“Calculation Agent” means the Transfer Agent acting in its capacity as calculation agent for the Series N Preferred Stock, and its successors and assigns.
“Common Stock” means the common stock of the Company, par value $0.01 per share, or any other shares of the capital stock of the Company into which such shares of common stock shall be reclassified or changed.
“Depositary” means DTC or its nominee or any successor depositary appointed by the Company.
“Dividend Payment Date” shall have the meaning set forth in Section 4(a) hereof.
“Dividend Period” shall have the meaning set forth in Section 4(a) hereof.
“Dividend Record Date” shall have the meaning set forth in Section 4(a) hereof.
“DTC” means The Depository Trust Company.
“Holder” means the Person in whose name the shares of the Series N Preferred Stock are registered, which may be treated by the Company, Calculation Agent, Transfer Agent, Registrar
and paying agent as the absolute owner of the shares of Series N Preferred Stock for the purpose of making payment and for all other purposes.
“Junior Stock” means the Common Stock and any other class or series of stock of the
Company now existing or hereafter authorized over which Series N Preferred Stock has
preference or priority in the payment of dividends or in the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the Company.
“LIBOR Determination Date” means the second London Banking Day immediately preceding the first day of the relevant Dividend Period.
“London Banking Day” means any day on which commercial banks are open for general business (including dealings in deposits in United States dollars) in London.
“Nonpayment” shall have the meaning set forth in Section 7(b)(i) hereof.
“Officer” means the Chief Executive Officer, the Chairman, the Chief Administrative Officer, any Vice Chairman, the Chief Financial Officer, the Controller, the Chief Accounting Officer, the Treasurer, any Deputy Treasurer, any Assistant Treasurer, any Vice President, the General Counsel and Corporate Secretary and any Assistant Secretary of the Company.
“Person” means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint-stock company, limited liability company, trust, or other entity.
“Preferred Stock Director” shall have the meaning set forth in Section 7(b)(i) hereof.
“Preferred Stock Director Termination Date” shall have the meaning set forth in Section 7(b)(iv) hereof.
“Registrar” means the Transfer Agent acting in its capacity as registrar for the Series N Preferred Stock, and its successors and assigns.
“Regulatory Capital Event” means the good faith determination by the Company that, as a result of (i) any amendment to, clarification of, or change in, the laws or regulations of the United States or any political subdivision of or in the United States that is enacted or becomes effective after the initial issuance of any share of the Series N Preferred Stock, (ii) any proposed change in those laws or regulations that is announced or becomes effective after the initial issuance of any share of the Series N Preferred Stock, or (iii) any official administrative decision or judicial decision or administrative action or other official pronouncement interpreting or applying those laws or regulations or policies with respect thereto that is announced after the initial issuance of any share of the Series N Preferred Stock, there is more than an insubstantial risk that the Company will not be entitled to treat the full liquidation preference amount of $25,000 per share of the Series N Preferred Stock then outstanding as “tier 1 capital” (or its equivalent) for purposes of the capital adequacy guidelines of the Federal Reserve (or, as and if applicable, the capital adequacy guidelines or regulations of any successor Appropriate Federal Banking Agency) as then in effect and applicable, for so long as any share of the Series N Preferred Stock is outstanding.
“Reuters LIBOR01” means the display designated on the Reuters 3000 Xtra Service on page LIBOR01 Page (or such other page as may replace “Reuters LIBOR01” page on the service or such other service as may be nominated by the British Bankers’ Association or other
administrator of LIBOR for the purpose of displaying London interbank offered rates for United States dollar deposits or loans).
“Series N Preferred Stock” shall have the meaning set forth in Section 1 hereof.
“Series N Preferred Stock Certificate” shall have the meaning set forth in Section 14(a) hereof.
“Three-month LIBOR” means the rate (expressed as a percentage per annum) for deposits in United States dollars for a three-month period commencing on the first day of a Dividend Period that appears on the Reuters LIBOR01 page as of 11:00 a.m. (London time) on the LIBOR Determination Date for that Dividend Period. If such rate does not appear on the Reuters LIBOR01 page, Three-month LIBOR will be determined on the basis of the rates at which deposits in United States dollars for a three-month period commencing on the first day of that Dividend Period and in a principal amount of not less than $1 million are offered to prime banks in the London interbank market by four major banks in the London interbank market selected by the Calculation Agent (after consultation with the Company), at approximately 11:00 a.m., London time, on the LIBOR Determination Date for that Dividend Period. The Calculation Agent will request the principal London office of each of such banks to provide a quotation of its rate. If at least two such quotations are provided, Three-month LIBOR with respect to that Dividend Period will be the arithmetic mean (rounded upward if necessary to the nearest whole multiple of 0.00001%) of such quotations. If fewer than two quotations are provided, Three-month LIBOR with respect to that Dividend Period will be the arithmetic mean (rounded upward if necessary to the nearest whole multiple of 0.00001%) of the rates quoted by three major banks in New York City selected by the Calculation Agent (after consultation with the Company), at approximately 11:00 a.m., New York City time, on the LIBOR Determination Date for that Dividend Period for loans in United States dollars to leading European banks for a three-month period commencing on the first day of that Dividend Period and in a principal amount of not less than $1 million. However, if fewer than three banks selected by the Calculation Agent to provide quotations are quoting as described above, Three-month LIBOR for that Dividend Period will be the same Three-month LIBOR as determined for the previous Dividend Period or, in the case of the Dividend Period beginning on November 15, 2019, 0.2328%. The determination of Three-month LIBOR for each relevant Dividend Period by the Calculation Agent will (in the absence of manifest error) be final and binding.
“Transfer Agent” means Computershare Trust Company, N.A., a federally chartered national association, acting as Transfer Agent, Calculation Agent, Registrar and paying agent for the Series N Preferred Stock, and its successors and assigns.
“Trust” shall have the meaning set forth in Section 6(d).
Section 4. Dividends.
(a) Rate. Holders shall be entitled to receive, when, as and if declared by the Board of Directors or any duly authorized committee thereof, but only out of funds legally available therefor, noncumulative cash dividends on each share of Series N Preferred Stock in the amounts
specified below in this Section 4, and no more, payable (i) semiannually in arrears on each May 15 and November 15 (each, a “Dividend Payment Date”), beginning May 15, 2015, from and including the date of issuance to, but excluding, November 15, 2019; provided, however, if any such day is not a Business Day, then payment of any dividend otherwise payable on that date will be made on the next succeeding day that is a Business Day, without any interest or other payment in respect of such postponement, and (ii) quarterly in arrears on each February 15, May 15, August 15 and November 15, beginning August 15, 2024, from and including November 15, 2019; provided, however, if any such day is not a Business Day, then payment of any dividend otherwise payable on that date will be made on the next succeeding day that is a Business Day, except if that day falls in the next calendar month, in which case, the payment of any dividend otherwise payable will be made on the immediately preceding Business Day, with dividends accruing to the actual payment date (each such day on which dividends are payable for any Dividend Period (as defined below) after the Dividend Period to but excluding November 15, 2019, a “Dividend Payment Date”). The period from and including the date of issuance of the Series N Preferred Stock or any Dividend Payment Date to, but excluding, the next Dividend Payment Date is a “Dividend Period.” Dividends on each share of Series N Preferred Stock will accrue on the liquidation preference of $25,000 per share at a rate per annum equal to (i) 5.800%, for each Dividend Period from and including the date of issuance to, but excluding, November 15, 2019 and (ii) Three-month LIBOR plus 4.093%, for each Dividend Period from and including November 15, 2019. The record date for payment of dividends on the Series N Preferred Stock will be the record date fixed by the Board of Directors or any other duly authorized committee thereof that is not more than 30 nor less than 10 days prior to such Dividend Payment Date (each, a “Dividend Record Date”). Any such day that is a Dividend Record Date will be a Dividend Record Date whether or not such day is a Business Day. The amount of dividends payable on or prior to November 15, 2019 will be computed on the basis of a 360-day year of twelve 30-day months. The amount of dividends payable after November 15, 2019 will be computed on the basis of a 360-day year and the actual number of days elapsed.
(b) Noncumulative Dividends. If the Board of Directors or any duly authorized committee thereof does not declare a dividend on the Series N Preferred Stock for any Dividend Period prior to the related Dividend Payment Date, that dividend will not accrue, and the Company will have no obligation to pay, and Holders shall have no right to receive, a dividend for that Dividend Period on the related Dividend Payment Date or at any future time, whether or not dividends on the Series N Preferred Stock or any other series of preferred stock or common stock are declared for any subsequent period. References herein to the “accrual” of dividends refer only to the determination of the amount of such dividend and do not imply that any right to a dividend arises prior to the date on which a dividend is declared.
(c) Priority of Dividends. So long as any share of Series N Preferred Stock remains outstanding, unless as to a Dividend Payment Date full dividends on all outstanding shares of the Series N Preferred Stock have been declared and paid or declared and a sum sufficient for the payment of those dividends has been set aside for the Dividend Period then ending, the Company will not, and will cause its subsidiaries not to, during the next succeeding Dividend Period that commences on such Dividend Payment Date, declare or pay any dividend on, make any
distributions relating to, or redeem, purchase, acquire or make a liquidation payment relating to, any Junior Stock, or make any guarantee payment with respect thereto, other than:
(i) purchases, redemptions or other acquisitions of shares of Junior Stock in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of employees, officers, directors or consultants;
(ii) purchases of shares of Common Stock pursuant to a contractually binding requirement to buy stock existing prior to the commencement of the then-current Dividend Period, including under a contractually binding stock repurchase plan;
(iii) as a result of an exchange or conversion of any class or series of Junior Stock for any other class or series of Junior Stock;
(iv) the purchase of fractional interests in shares of Junior Stock pursuant to the conversion or exchange provisions of such Junior Stock or the security being converted or exchanged;
(v) the purchase of Junior Stock by an investment banking subsidiary of the Company in connection with the distribution thereof; or
(vi) the purchase of Junior Stock by any investment banking subsidiary of the Company in connection with market-making or other secondary market activities in the ordinary course of the business of such subsidiary.
The restrictions set forth in the preceding provisions of this Section 4(c) shall not apply to any Junior Stock dividends paid by the Company where the dividend is in the form of the same stock (or the right to buy the same stock) as that on which the dividend is being paid.
Except as provided below, for so long as any share of Series N Preferred Stock remains outstanding, if dividends are not declared and paid in full upon the shares of Series N Preferred Stock and any class or series of stock of the Company now existing or hereafter authorized that ranks equally with the Series N Preferred Stock in the payment of dividends, all dividends declared upon shares of Series N Preferred Stock and such other stock will be declared on a proportional basis so that the amount of dividends declared per share will bear to each other the same ratio that accrued dividends for the then-current Dividend Period per share of Series N Preferred Stock and accrued dividends for the then-current Dividend Period per share of such other stock (including, in the case of any such other stock that bears cumulative dividends, all accrued and unpaid dividends) bear to each other.
Subject to the foregoing, and not otherwise, such dividends payable in cash, stock or otherwise, as may be determined by the Board of Directors or any duly authorized committee thereof, may be declared and paid on any other class or series of stock of the Company from time to time out of any funds legally available for such payment, and Holders will not be entitled to participate in those dividends.
Section 5. Liquidation Rights.
(a) Liquidation. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company, Holders shall be entitled, out of funds legally available therefor, before any distribution or payment may be made by the Company or set aside for the holders of any Junior Stock and subject to the rights of the holders of any class or series of stock ranking senior to or on parity with Series N Preferred Stock upon liquidation and the rights of the Company’s depositors and other creditors, to receive in full a liquidating distribution in the amount of the liquidation preference of $25,000 per share (the “Series N Liquidation Preference”), plus any accrued dividends thereon from the last Dividend Payment Date to, but excluding, the date of the liquidation, dissolution or winding up if and to the extent declared but not yet paid. Holders shall not be entitled to any further payments in the event of any such voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company other than what is expressly provided for in this Section 5.
(b) Partial Payment. If the assets of the Company are not sufficient to pay in full the aforesaid liquidation distributions to the Holders and any liquidation distributions owed to holders of any class or series of stock of the Company ranking equally with the Series N Preferred Stock in the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the Company, the amounts paid to the Holders and to the holders of all such equally ranking stock shall be pro rata in accordance with the respective aggregate liquidating distributions to which they would otherwise be entitled.
(c) Merger, Consolidation and Sale of Assets Not Liquidation. For purposes of this Section 5, the sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the property and assets of the Company shall not be deemed a voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, nor shall the merger, consolidation or any other business combination transaction of the Company into or with any other corporation or Person or the merger, consolidation or any other business combination transaction of any other corporation or Person into or with the Company be deemed to be a voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company.
Section 6. Redemption.
(a) Optional Redemption. The Company, at the option of its Board of Directors or any duly authorized committee thereof, may redeem out of funds legally available therefor, (i) in whole or in part, from time to time, the shares of Series N Preferred Stock at the time outstanding, on any Dividend Payment Date on or after November 15, 2019, or (ii) in whole but not in part at any time within 90 days following a Regulatory Capital Event, in each case at a redemption price equal to $25,000 per share plus any declared and unpaid dividends, without accumulation of any undeclared dividends, to but excluding the redemption date, upon notice given as provided in Section 6(b) below.
(b) Notice of Redemption. Notice of every redemption of shares of Series N Preferred Stock shall be mailed by first class mail, postage prepaid, addressed to the Holders of such shares
to be redeemed at their respective last addresses appearing on the stock register of the Company. Such mailing shall be at least 30 days and not more than 60 days before the date fixed for redemption. Any notice mailed as provided in this Section 6(b) shall be conclusively presumed to have been duly given, whether or not the Holder receives such notice, but failure duly to give such notice by mail, or any defect in such notice or in the mailing thereof, to any Holder of shares of Series N Preferred Stock designated for redemption shall not affect the validity of the proceedings for the redemption of any other shares of Series N Preferred Stock. Each notice shall state:
(i) the redemption date;
(ii) the total number of shares of Series N Preferred Stock to be redeemed and, if fewer than all the shares of a Holder are to be redeemed, the number of such shares to be redeemed;
(iii) the redemption price;
(iv) the place or places where the certificates for such shares are to be surrendered for payment of the redemption price, if applicable; and
(v) that dividends on the shares to be redeemed will cease to accrue on the redemption date.
Notwithstanding the foregoing, if the certificates evidencing the shares of Series N Preferred Stock are held of record by a depositary and any related depository shares are held of record by a Depositary or its nominee, the Company may give such notice in any manner permitted by the Depositary.
(c) Partial Redemption. In case of any redemption of only part of the shares of Series N Preferred Stock at the time outstanding, the shares of Series N Preferred Stock to be redeemed shall be selected (i) pro rata from the Holders in proportion to the number of shares of Series N Preferred Stock held by such Holders, (ii) by lot or (iii) in such other manner as the Board of Directors or any duly authorized committee thereof may determine, in its sole discretion, to be fair and equitable; provided, however, that if for so long as the Series N Preferred Stock or depositary shares in respect thereof are listed on the New York Stock Exchange, the foregoing clause (iii) shall apply only if such method of selection is not then prohibited by any then applicable rule of the New York Stock Exchange or the New York Stock Exchange consents to or grants a waiver or exemption from such rule. Subject to the provisions of this Section 6, the Board of Directors or any duly authorized committee thereof shall have full power and authority to prescribe the terms and conditions upon which shares of Series N Preferred Stock shall be redeemed from time to time.
(d) Effectiveness of Redemption. If notice of redemption has been duly given and if on or before the redemption date specified in the notice all funds necessary for the redemption have been set aside by the Company, separate and apart from its other assets, for the pro rata benefit of the Holders of the shares called for redemption, so as to be and continue to be available therefor,
or deposited by the Company with a bank or trust company selected by the Board of Directors or any duly authorized committee thereof (the “Trust”) in trust for the pro rata benefit of the Holders of the shares called for redemption, then, notwithstanding that any certificate for any share so called for redemption has not been surrendered for cancellation, on and after the redemption date all shares so called for redemption shall cease to be outstanding, all dividends with respect to such shares shall cease to accrue on such redemption date, and all rights with respect to such shares shall forthwith on such redemption date cease and terminate, except only the right of the Holders thereof to receive the amount payable on such redemption from the Trust at any time after the redemption date from the funds so deposited, without interest. The Company shall be entitled to receive, from time to time, from the Trust any interest accrued on such funds, and the Holders of any shares called for redemption shall have no claim to any such interest. Any funds so deposited and unclaimed at the end of three years from the redemption date shall, to the extent permitted by law, be released or repaid to the Company, and in the event of such repayment to the Company, the Holders of the shares so called for redemption shall be deemed to be unsecured creditors of the Company for an amount equivalent to the amount deposited as stated above for the redemption of such shares and so repaid to the Company, but shall in no event be entitled to any interest.
Section 7. Voting Rights.
(a) General. The Holders shall not be entitled to vote on any matter except as set forth in Section 7(b) below or as required by the Delaware General Corporation Law.
(b) Special Voting Right.
(i) Voting Right. If and whenever dividends on the Series N Preferred Stock or any other class or series of preferred stock that ranks on parity with Series N Preferred Stock as to payment of dividends and upon which voting rights equivalent to those granted by this Section 7(b)(i) have been conferred and are exercisable (any such class or series being referred to herein as “dividend parity stock”) have not been paid in an aggregate amount equal, as to any class or series, to at least three semi-annual or six quarterly Dividend Periods, as applicable, (whether consecutive or not) (a “Nonpayment”), the authorized number of directors constituting the Board of Directors shall be increased by two, and the Holders, together with holders of dividend parity stock, shall have the right, voting separately as a single class without regard to class or series (and with voting rights allocated pro rata based on the liquidation preference of each such class or series), to the exclusion of the holders of Common Stock, to elect two directors of the Company to fill such newly created directorships (and to fill any vacancies in the terms of such directorships), provided that it shall be a qualification for election of any such director that the election of such director shall not cause the Company to violate the corporate governance requirements of the New York Stock Exchange (or other exchange on which the Company’s securities may be listed) that listed companies must have a majority of independent directors and further provided that the Board of Directors shall at no time include more than two such directors. Each such director elected by the Holders together with holders of dividend parity stock is a “Preferred Stock Director.”
(ii) Election. The election of the Preferred Stock Directors will take place at any annual meeting of stockholders or any special meeting of the Holders and any dividend parity stock, called as provided herein. At any time after the special voting power has vested pursuant to Section 7(b)(i) above, the secretary of the Company may, and upon the written request (addressed to the secretary at the Company’s principal office) of the holders of at least 20% of the voting power of the Series N Preferred Stock or the holders of at least 20% of the voting power of any series of dividend parity stock (with such voting power measured based on the voting power to elect Preferred Stock Directors), must (unless such request is received less than 90 days before the date fixed for the next annual or special meeting of the stockholders of the Company, in which event such election shall be held at such next annual or special meeting of stockholders), call a special meeting of the holders of Series N Preferred Stock and any dividend parity stock for the purposes of electing Preferred Stock Directors. The Preferred Stock Directors shall each be entitled to one vote per director on any matter.
(iii) Notice of Special Meeting. Notice for a special meeting to elect Preferred Stock Directors will be given in a similar manner to that provided in the Company’s by-laws for a special meeting of the stockholders. If the secretary of the Company does not call a special meeting within 20 days after receipt of any such request, then any Holder may (at the expense of the Company) call such meeting, upon notice as provided in this Section 7(b)(iii), and for that purpose will have access to the stock register of the Company. The Preferred Stock Directors elected at any such special meeting and each Preferred Stock Director elected at a subsequent annual or special meeting of stockholders, will be elected for term expiring upon the earlier of the Preferred Stock Director Termination Date and the next annual meeting of stockholders following such Preferred Stock Director's election. In case any vacancy in the office of a Preferred Stock Director occurs (other than prior to the initial election of the Preferred Stock Directors), the vacancy may be filled by the Preferred Stock Director remaining in office, or if none remains in office, by a plurality of the votes cast by the holders of Series N Preferred Stock and any dividend parity stock, voting together as a single class, and the Preferred Stock Director so appointed or elected to fill such vacancy shall serve for a term expiring at the next annual meeting of the stockholders. Preferred Stock Directors may only be elected by the holders of Series N Preferred Stock and dividend parity stock in accordance with this Section 7. If the holders of Series N Preferred Stock and such dividend parity stock fail to elect a sufficient number of directors to fill all directorships for which they are entitled to elect directors pursuant to this Section 7, then any directorship not so filled shall remain vacant until such time as the holders of Series N Preferred Stock and such dividend parity stock elect a person to fill such directorship in accordance with this Section 7, or such vacancy is otherwise filled in accordance with this Section 7; and no such directorship may be filled by stockholders of the Corporation other than in accordance with this Section 7.
(iv) Termination; Removal. Whenever the Company has paid noncumulative dividends in full for at least two consecutive semi-annual or four consecutive quarterly
Dividend Periods following a Nonpayment on the Series N Preferred Stock and on any dividend parity stock entitled to noncumulative dividends and has paid cumulative dividends in full on any dividend parity stock entitled to cumulative dividends, then the right of the Holders to elect the Preferred Stock Directors will cease (but subject always to the same provisions for the vesting of the special voting rights in the case of any similar non-payment of dividends in respect of future Dividend Periods) (the time of such cessation, the “Preferred Stock Director Termination Date”). Upon a Preferred Stock Director Termination Date, the terms of office of the Preferred Stock Directors will immediately terminate, the persons then serving as Preferred Stock Directors shall immediately cease to be qualified to hold office as Preferred Stock Directors, the Preferred Stock Directors shall cease to be directors of the Company and the number of directors constituting the Board of Directors shall be automatically reduced, without any action by the Board of Directors or the stockholders of the Company, by the number of Preferred Stock Directors authorized immediately prior to such termination. Any Preferred Stock Director may be removed at any time without cause by the holders of a majority of the voting power of outstanding shares of the capital stock then entitled to vote in the election of Preferred Stock Directors, voting together as a single class (with such voting power measured based on the voting power to elect Preferred Stock Directors).
(c) Senior Issuances; Adverse Changes. So long as any shares of Series N Preferred Stock are outstanding, but subject to the final paragraph of this Section 7(c), in addition to any other vote or consent of holders of the Company’s capital stock required by Delaware law, the vote or consent of the holders of at least two-thirds of the voting power of the Series N Preferred Stock and the holders of any other preferred stock entitled to vote thereon, voting together as a single class, given in person or by proxy at an annual or special meeting of stockholders, or given in writing without a meeting, will be necessary for effecting or validating any of the following actions, whether or not such approval is required by Delaware law:
(i) any amendment, alteration or repeal of any provision of the Company’s certificate of incorporation (including the certificate of designations creating the Series N Preferred Stock) or the Company’s by-laws that would alter or change the voting powers, preferences, economic rights or special rights of the Series N Preferred Stock so as to affect them adversely;
(ii) any amendment or alteration of the Company’s certificate of incorporation to authorize or create, or increase the authorized amount of, any shares of, or any securities convertible into shares of, any class or series of the Company's capital stock ranking prior to the Series N Preferred Stock in the payment of dividends or in the distribution of assets on any liquidation, dissolution, or winding up of the Company; or
(iii) the consummation of a binding share exchange or reclassification involving the Series N Preferred Stock or a merger or consolidation of the Company with another entity, except that holders of Series N Preferred Stock will have no right to vote under this provision or otherwise under Delaware law if in each case (i) the Series N Preferred Stock remains outstanding or, in the case of any such merger or consolidation with
respect to which the Company is not the surviving or resulting entity, is converted into or exchanged for preferred securities of the surviving or resulting entity or its ultimate parent, that is an entity organized and existing under the laws of the United States of America, any state thereof or the District of Columbia and that is a corporation for U.S. federal income tax purposes (or if such entity is not a corporation, the Company having received an opinion of nationally recognized counsel experienced in such matters to the effect that Holders will be subject to tax for U.S. federal income tax purposes with respect to such new preferred securities after such merger or consolidation in the same amount, at the same time and otherwise in the same manner as would have been the case under the Series N Preferred Stock prior to such merger or consolidation), and (ii) such Series N Preferred Stock remaining outstanding or such preferred securities, as the case may be, have such rights, preferences, privileges and voting powers, taken as a whole, as are not materially less favorable to the holders thereof than the rights, preferences, privileges and voting powers of the Series N Preferred Stock, taken as a whole;
provided, however, that, for the avoidance of doubt, any increase in the amount of the authorized or issued Series N Preferred Stock or authorized preferred stock or any securities convertible into preferred stock or the creation and issuance, or an increase in the authorized or issued amount, of other series of preferred stock or any securities convertible into preferred stock ranking equally with and/or junior to the Series N Preferred Stock with respect to the payment of dividends (whether such dividends are cumulative or noncumulative) and/or the distribution of assets upon the Company’s liquidation, dissolution or winding up will not be deemed to adversely affect the voting powers, preferences or special rights of the Series N Preferred Stock, and no stockholder will have the right to vote on such an increase, creation or issuance by reason of this Section 7.
If any amendment, alteration, repeal, share exchange, reclassification, merger or consolidation specified in this Section 7(c) would adversely affect the Series N Preferred Stock but not all series of preferred stock of the Company, then only such series of preferred stock as are adversely affected by and entitled to vote on the matter shall vote on the matter together with the Series N Preferred Stock as a single class (in lieu of all other series of preferred stock) for purposes of the vote or consent required by this Section 7(c).
(d) No Vote if Redemption. No vote or consent of the Holders shall be required pursuant to Section 7(b) or 7(c) if, at or prior to the time when the act with respect to such vote or consent would otherwise be required shall be effected, the Company shall have redeemed or shall have called for redemption all outstanding shares of Series N Preferred Stock, with proper notice and sufficient funds having been set aside for such redemption, in each case pursuant to Section 6 above.
Section 8. Preemption and Conversion Rights.
The Holders shall not have any preemptive rights or conversion rights as a result of the terms hereof.
Section 9. Rank.
For the avoidance of doubt, the Board of Directors or any duly authorized committee thereof may, without the vote of the Holders, authorize and issue additional shares of Junior Stock or shares of any class or series of stock of the Company now existing or hereafter authorized that ranks equally with the Series N Preferred Stock in the payment of dividends or in the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the Company.
Section 10. Reacquired Shares.
The Board of Directors shall take such actions as are necessary to cause the shares of Series N Preferred Stock which have been redeemed or otherwise purchased or acquired by the Company to be retired and restored to the status of authorized but unissued shares of preferred stock without designation as to series.
Section 11. No Sinking Fund.
Shares of Series N Preferred Stock are not subject to the operation of a sinking fund.
Section 12. Transfer Agent, Calculation Agent, Registrar and Paying Agent.
The duly appointed Transfer Agent, Calculation Agent, Registrar and paying agent for the Series N Preferred Stock shall be Computershare Trust Company, N.A. The Company may, in its sole discretion, remove the Transfer Agent in accordance with the agreement between the Company and the Transfer Agent; provided, however, that the Company shall appoint a successor transfer agent who shall accept such appointment prior to the effectiveness of such removal. Upon any such removal or appointment, the Company shall send notice thereof by first-class mail, postage prepaid, to the Holders.
Section 13. Replacement Certificates for Mutilated, Destroyed, Stolen and Lost Certificates.
If physical certificates are issued, the Company shall replace any mutilated certificate at the Holder’s expense upon surrender of that certificate to the Transfer Agent. The Company shall replace certificates that become destroyed, stolen or lost at the Holder’s expense upon delivery to the Company and the Transfer Agent of satisfactory evidence that the certificate has been destroyed, stolen or lost, together with any indemnity that may be required by the Transfer Agent and the Company.
Section 14. Form.
(a) Series N Preferred Stock Certificates. Series N Preferred Stock shall be issued in certificated form in substantially the form attached hereto as Exhibit A (each, a “Series N Preferred Stock Certificate”). Exhibit A is hereby incorporated in and expressly made a part of this Certificate of Designations. The Series N Preferred Stock Certificates may have notations, legends or endorsements required by law, stock exchange rules, agreements to which the Company is subject, if any, or usage (provided that any such notation, legend or endorsement is in a form acceptable to the Company).
(b) Signature. Two Officers shall sign any Series N Preferred Stock Certificate for the Company, in accordance with the Company’s by-laws and applicable law, by manual or facsimile signature. If an Officer whose signature is on a Series N Preferred Stock Certificate no longer holds that office at the time the Transfer Agent countersigned the Series N Preferred Stock Certificate, such Series N Preferred Stock Certificate shall be valid nevertheless. A Series N Preferred Stock Certificate shall not be valid until an authorized signatory of the Transfer Agent manually countersigns such Series N Preferred Stock Certificate. Each Series N Preferred Stock Certificate shall be dated the date of its countersignature.
Section 15. Taxes.
(a) Transfer Taxes. The Company shall pay any and all stock transfer, documentary, stamp and similar taxes that may be payable in respect of any issuance or delivery of shares of Series N Preferred Stock. The Company shall not, however, be required to pay any such tax that may be payable in respect of any transfer involved in the issuance or delivery of shares of Series N Preferred Stock, in a name other than that in which the shares of Series N Preferred Stock were registered, or in respect of any payment to any Person other than a payment to the registered holder thereof, and shall not be required to make any such issuance, delivery or payment unless and until the Person otherwise entitled to such issuance, delivery or payment has paid to the Company the amount of any such tax or has established, to the satisfaction of the Company, that such tax has been paid or is not payable.
(b) Withholding. All payments and distributions (or deemed distributions) on the shares of Series N Preferred Stock shall be subject to withholding and backup withholding of tax to the extent required by law, subject to applicable exemptions, and amounts withheld, if any, shall be treated as received by Holders.
Section 16. Notices.
All notices referred to herein shall be in writing, and, unless otherwise specified herein, all notices hereunder shall be deemed to have been given upon the earlier of receipt thereof or three Business Days after the mailing thereof if sent by registered or certified mail (unless first class mail shall be specifically permitted for such notice under the terms of this Certificate of Designations) with postage prepaid, addressed: (i) if to the Company, to its office at 399 Park
Avenue, New York, New York 10043 (Attention: Corporate Secretary) or to the Transfer Agent at its office at 250 Royall Street, Canton, Massachusetts 02021, or other agent of the Company designated as permitted by this Certificate of Designations, or (ii) if to any Holder, to such Holder at the address of such Holder as listed in the stock record books of the Company (which may include the records of the Transfer Agent) or (iii) to such other address as the Company or any such Holder, as the case may be, shall have designated by notice similarly given.
Section 17. Other Rights Disclaimed.
The shares of Series N Preferred Stock have no voting powers, preferences or relative, participating, optional or other special rights, or qualifications, limitations or restrictions thereof, other than as set forth herein or in the Certificate of Incorporation of the Company.
IN WITNESS WHEREOF, this Certificate of Designations has been executed on behalf of the Company by its Chief Accounting Officer this 28th day of October, 2014.
CITIGROUP INC.
By: _/s/ Jeffrey R. Walsh______________
Name: Jeffrey R. Walsh
Title: Chief Accounting Officer
Exhibit A
FORM OF
5.800% FIXED RATE / FLOATING RATE NONCUMULATIVE PREFERRED STOCK, SERIES N
Certificate Number_______ Number of Shares of Series N Preferred Stock______
CUSIP NO.:
CITIGROUP INC.
5.800% Fixed Rate / Floating Rate Noncumulative Preferred Stock, Series N
(par value $1.00 per share)
(liquidation preference $25,000 per share)
Citigroup Inc., a Delaware corporation (the “Company”), hereby certifies that [ ] (the “Holder”) is the registered owner of [ ] fully paid and non-assessable shares of the Company’s designated 5.800% Fixed Rate / Floating Rate Noncumulative Preferred Stock, Series N, with a par value of $1.00 per share and a liquidation preference of $25,000 per share (the “Series N Preferred Stock”). The shares of Series N Preferred Stock are transferable on the books and records of the Registrar, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer. The designations, rights, privileges, restrictions, preferences and other terms and provisions of the Series N Preferred Stock represented hereby are and shall in all respects be subject to the provisions of the Certificate of Designations dated October 28, 2014 as the same may be amended from time to time (the “Certificate of Designations”). Capitalized terms used herein but not defined shall have the meaning given them in the Certificate of Designations. The Company will provide a copy of the Certificate of Designations to a Holder without charge upon written request to the Company at its principal place of business.
Reference is hereby made to select provisions of the Series N Preferred Stock set forth on the reverse hereof, and to the Certificate of Designations, which select provisions and the Certificate of Designations shall for all purposes have the same effect as if set forth at this place.
Upon receipt of this certificate, the Holder is bound by the Certificate of Designations and is entitled to the benefits thereunder.
Unless the Registrar has properly countersigned, these shares of Series N Preferred Stock shall not be entitled to any benefit under the Certificate of Designations or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, this certificate has been executed on behalf of the Company by its [Title] and by its [Title] this __ day of ________, ________.
CITIGROUP INC.
By: _______________________________________
Name:
Title:
By: _______________________________________
Name:
Title:
REGISTRAR’S COUNTERSIGNATURE
These are shares of Series N Preferred Stock referred to in the within-mentioned Certificate of Designations.
Dated:
COMPUTERSHARE TRUST COMPANY, N.A., as Registrar
By: _______________________________________
Name:
Title:
REVERSE OF CERTIFICATE
Dividends on each share of Series N Preferred Stock shall be payable at the rate provided in the Certificate of Designations.
The shares of Series N Preferred Stock shall be redeemable at the option of the Company in the manner and in accordance with the terms set forth in the Certificate of Designations.
The Company shall furnish without charge to each holder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class or series of share capital issued by the Company and the qualifications, limitations or restrictions of such preferences and/or rights.
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers the shares of Series N Preferred Stock evidenced hereby to:
___________________________________________________
___________________________________________________
(Insert assignee’s social security or taxpayer identification number, if any)
___________________________________________________
___________________________________________________
(Insert address and zip code of assignee)
and irrevocably appoints:
___________________________________________________
___________________________________________________
as agent to transfer the shares of Series N Preferred Stock evidenced hereby on the books of the Transfer Agent. The agent may substitute another to act for him or her.
Date:
Signature:
___________________________________________________
(Sign exactly as your name appears on the other side of this Certificate)
Signature Guarantee: ___________________________________________________
(Signature must be guaranteed by an “eligible guarantor institution” that is a bank, stockbroker, savings and loan association or credit union meeting the requirements of the Transfer Agent, which requirements include membership or participation in the Securities Transfer Agents Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Transfer Agent in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.)
CERTIFICATE OF DESIGNATIONS
OF
5.875% FIXED RATE / FLOATING RATE NONCUMULATIVE PREFERRED STOCK SERIES O
OF
CITIGROUP INC.
______________________________
pursuant to Sections 103(f) and 151 of the
General Corporation Law of the State of Delaware
______________________________
Citigroup Inc., a Delaware corporation (the “Company”), hereby certifies that:
1. The Restated Certificate of Incorporation of the Company (as amended through the date hereof, the “Certificate of Incorporation”) fixes the total number of shares of all classes of capital stock that the Company shall have the authority to issue at six billion (6,000,000,000) shares of common stock, par value $0.01 per share, and thirty million (30,000,000) shares of preferred stock, par value $1.00 per share.
2. The Certificate of Incorporation expressly grants to the Board of Directors of the Company (the “Board of Directors”) authority to provide for the issuance of the shares of preferred stock in series, and to establish from time to time the number of shares to be included in each such series and to fix the designation, powers, preferences and rights of the shares of each such series and the qualifications, limitations or restrictions thereof.
3. Pursuant to the authority conferred upon a preferred stock committee (the “Preferred Stock Committee”) by the Board of Directors, the Preferred Stock Committee, by action duly taken on March 13, 2015, adopted resolutions (i) authorizing the issuance and sale of up to 60,000 shares of the Company’s preferred stock and (ii) approving this final form of Certificate of Designations of 5.875% Fixed Rate / Floating Rate Noncumulative Preferred Stock, Series O (the “Series O Preferred Stock”) establishing the number of shares to be included in this Series O Preferred Stock and fixing the designation, powers, preferences and rights of the shares of this Series O Preferred Stock and the qualifications, limitations or restrictions thereof as follows:
Section 1. Designation.
The designation of the series of preferred stock shall be “5.875% Fixed Rate / Floating Rate Noncumulative Preferred Stock, Series O” (the “Series O Preferred Stock”). Each share of Series O Preferred Stock shall be identical in all respects to every other share of Series O Preferred Stock.
Section 2. Number of Shares.
The number of authorized shares of Series O Preferred Stock shall be 60,000. That number from time to time may be increased (but not in excess of the total number of authorized shares of preferred stock) or decreased (but not below the number of shares of Series O Preferred Stock then outstanding) by further resolution duly adopted by the Board of Directors, the Preferred Stock Committee or any other duly authorized committee thereof and by the filing of a certificate pursuant to the provisions of the General Corporation Law of the State of Delaware stating that such increase or reduction, as the case may be, has been so authorized. The Company shall have the authority to issue fractional shares of Series O Preferred Stock.
Section 3. Definitions. As used herein with respect to Series O Preferred Stock:
“Appropriate Federal Banking Agency” means the “appropriate federal banking agency” with respect to the Company as that term is defined in Section 3(q) of the Federal Deposit Insurance Act of 1950, as amended, or any successor provision.
“Board of Directors” has the meaning set forth in the recitals above.
“Business Day” means any weekday that is not a legal holiday in New York City and is not a day on which banking institutions in New York City are authorized or required by law or regulation to be closed.
“Calculation Agent” means the Transfer Agent acting in its capacity as calculation agent for the Series O Preferred Stock, and its successors and assigns.
“Common Stock” means the common stock of the Company, par value $0.01 per share, or any other shares of the capital stock of the Company into which such shares of common stock shall be reclassified or changed.
“Depositary” means DTC or its nominee or any successor depositary appointed by the Company.
“Dividend Payment Date” shall have the meaning set forth in Section 4(a) hereof.
“Dividend Period” shall have the meaning set forth in Section 4(a) hereof.
“Dividend Record Date” shall have the meaning set forth in Section 4(a) hereof.
“DTC” means The Depository Trust Company.
“Holder” means the Person in whose name the shares of the Series O Preferred Stock are registered, which may be treated by the Company, Calculation Agent, Transfer Agent, Registrar
and paying agent as the absolute owner of the shares of Series O Preferred Stock for the purpose of making payment and for all other purposes.
“Junior Stock” means the Common Stock and any other class or series of stock of the
Company now existing or hereafter authorized over which Series O Preferred Stock has
preference or priority in the payment of dividends or in the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the Company.
“LIBOR Determination Date” means the second London Banking Day immediately preceding the first day of the relevant Dividend Period.
“London Banking Day” means any day on which commercial banks are open for general business (including dealings in deposits in United States dollars) in London.
“Nonpayment” shall have the meaning set forth in Section 7(b)(i) hereof.
“Officer” means the Chief Executive Officer, the Chairman, the Chief Administrative Officer, any Vice Chairman, the Chief Financial Officer, the Controller, the Chief Accounting Officer, the Treasurer, any Deputy Treasurer, any Assistant Treasurer, any Vice President, the General Counsel and Corporate Secretary and any Assistant Secretary of the Company.
“Person” means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint-stock company, limited liability company, trust, or other entity.
“Preferred Stock Director” shall have the meaning set forth in Section 7(b)(i) hereof.
“Preferred Stock Director Termination Date” shall have the meaning set forth in Section 7(b)(iv) hereof.
“Registrar” means the Transfer Agent acting in its capacity as registrar for the Series O Preferred Stock, and its successors and assigns.
“Regulatory Capital Event” means the good faith determination by the Company that, as a result of (i) any amendment to, clarification of, or change in, the laws or regulations of the United States or any political subdivision of or in the United States that is enacted or becomes effective after the initial issuance of any share of the Series O Preferred Stock, (ii) any proposed change in those laws or regulations that is announced or becomes effective after the initial issuance of any share of the Series O Preferred Stock, or (iii) any official administrative decision or judicial decision or administrative action or other official pronouncement interpreting or applying those laws or regulations or policies with respect thereto that is announced after the initial issuance of any share of the Series O Preferred Stock, there is more than an insubstantial risk that the Company will not be entitled to treat the full liquidation preference amount of $25,000 per share of the Series O Preferred Stock then outstanding as “tier 1 capital” (or its equivalent) for purposes of the capital adequacy guidelines of the Federal Reserve (or, as and if applicable, the capital adequacy guidelines or regulations of any successor Appropriate Federal Banking Agency) as then in effect and applicable, for so long as any share of the Series O Preferred Stock is outstanding.
“Reuters LIBOR01” means the display designated on the Reuters 3000 Xtra Service on page LIBOR01 Page (or such other page as may replace “Reuters LIBOR01” page on the service or such other service as may be nominated by the British Bankers’ Association or other
administrator of LIBOR for the purpose of displaying London interbank offered rates for United States dollar deposits or loans).
“Series O Preferred Stock” shall have the meaning set forth in Section 1 hereof.
“Series O Preferred Stock Certificate” shall have the meaning set forth in Section 14(a) hereof.
“Three-month LIBOR” means the rate (expressed as a percentage per annum) for deposits in United States dollars for a three-month period commencing on the first day of a Dividend Period that appears on the Reuters LIBOR01 page as of 11:00 a.m. (London time) on the LIBOR Determination Date for that Dividend Period. If such rate does not appear on the Reuters LIBOR01 page, Three-month LIBOR will be determined on the basis of the rates at which deposits in United States dollars for a three-month period commencing on the first day of that Dividend Period and in a principal amount of not less than $1 million are offered to prime banks in the London interbank market by four major banks in the London interbank market selected by the Calculation Agent (after consultation with the Company), at approximately 11:00 a.m., London time, on the LIBOR Determination Date for that Dividend Period. The Calculation Agent will request the principal London office of each of such banks to provide a quotation of its rate. If at least two such quotations are provided, Three-month LIBOR with respect to that Dividend Period will be the arithmetic mean (rounded upward if necessary to the nearest whole multiple of 0.00001%) of such quotations. If fewer than two quotations are provided, Three-month LIBOR with respect to that Dividend Period will be the arithmetic mean (rounded upward if necessary to the nearest whole multiple of 0.00001%) of the rates quoted by three major banks in New York City selected by the Calculation Agent (after consultation with the Company), at approximately 11:00 a.m., New York City time, on the LIBOR Determination Date for that Dividend Period for loans in United States dollars to leading European banks for a three-month period commencing on the first day of that Dividend Period and in a principal amount of not less than $1 million. However, if fewer than three banks selected by the Calculation Agent to provide quotations are quoting as described above, Three-month LIBOR for that Dividend Period will be the same Three-month LIBOR as determined for the previous Dividend Period or, in the case of the Dividend Period beginning on March 27, 2020, 0.27065%. The determination of Three-month LIBOR for each relevant Dividend Period by the Calculation Agent will (in the absence of manifest error) be final and binding.
“Transfer Agent” means Computershare Trust Company, N.A., a federally chartered national association, acting as Transfer Agent, Calculation Agent, Registrar and paying agent for the Series O Preferred Stock, and its successors and assigns.
“Trust” shall have the meaning set forth in Section 6(d).
Section 4. Dividends.
(a) Rate. Holders shall be entitled to receive, when, as and if declared by the Board of Directors or any duly authorized committee thereof, but only out of funds legally available therefor, noncumulative cash dividends on each share of Series O Preferred Stock in the amounts
specified below in this Section 4, and no more, payable (i) semiannually in arrears on each March 27 and September 27 (each, a “Dividend Payment Date”), beginning September 27, 2015, from and including the date of issuance to, but excluding, March 27, 2020; provided, however, if any such day is not a Business Day, then payment of any dividend otherwise payable on that date will be made on the next succeeding day that is a Business Day, without any interest or other payment in respect of such postponement, and (ii) quarterly in arrears on each March 27, June 27, September 27 and December 27, beginning June 27, 2020, from and including March 27, 2020; provided, however, if any such day is not a Business Day, then payment of any dividend otherwise payable on that date will be made on the next succeeding day that is a Business Day, except if that day falls in the next calendar month, in which case, the payment of any dividend otherwise payable will be made on the immediately preceding Business Day, with dividends accruing to the actual payment date (each such day on which dividends are payable for any Dividend Period (as defined below) after the Dividend Period to but excluding March 27, 2020, a “Dividend Payment Date”). The period from and including the date of issuance of the Series O Preferred Stock or any Dividend Payment Date to, but excluding, the next Dividend Payment Date is a “Dividend Period.” Dividends on each share of Series O Preferred Stock will accrue on the liquidation preference of $25,000 per share at a rate per annum equal to (i) 5.875%, for each Dividend Period from and including the date of issuance to, but excluding, March 27, 2020 and (ii) Three-month LIBOR plus 4.059%, for each Dividend Period from and including March 27, 2020. The record date for payment of dividends on the Series O Preferred Stock will be the record date fixed by the Board of Directors or any other duly authorized committee thereof that is not more than 30 nor less than 10 days prior to such Dividend Payment Date (each, a “Dividend Record Date”). Any such day that is a Dividend Record Date will be a Dividend Record Date whether or not such day is a Business Day. The amount of dividends payable on or prior to March 27, 2020 will be computed on the basis of a 360-day year of twelve 30-day months. The amount of dividends payable after March 27, 2020 will be computed on the basis of a 360-day year and the actual number of days elapsed.
(b) Noncumulative Dividends. If the Board of Directors or any duly authorized committee thereof does not declare a dividend on the Series O Preferred Stock for any Dividend Period prior to the related Dividend Payment Date, that dividend will not accrue, and the Company will have no obligation to pay, and Holders shall have no right to receive, a dividend for that Dividend Period on the related Dividend Payment Date or at any future time, whether or not dividends on the Series O Preferred Stock or any other series of preferred stock or common stock are declared for any subsequent period. References herein to the “accrual” of dividends refer only to the determination of the amount of such dividend and do not imply that any right to a dividend arises prior to the date on which a dividend is declared.
(c) Priority of Dividends. So long as any share of Series O Preferred Stock remains outstanding, unless as to a Dividend Payment Date full dividends on all outstanding shares of the Series O Preferred Stock have been declared and paid or declared and a sum sufficient for the payment of those dividends has been set aside for the Dividend Period then ending, the Company will not, and will cause its subsidiaries not to, during the next succeeding Dividend Period that commences on such Dividend Payment Date, declare or pay any dividend on, make any
distributions relating to, or redeem, purchase, acquire or make a liquidation payment relating to, any Junior Stock, or make any guarantee payment with respect thereto, other than:
(i) purchases, redemptions or other acquisitions of shares of Junior Stock in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of employees, officers, directors or consultants;
(ii) purchases of shares of Common Stock pursuant to a contractually binding requirement to buy stock existing prior to the commencement of the then-current Dividend Period, including under a contractually binding stock repurchase plan;
(iii) as a result of an exchange or conversion of any class or series of Junior Stock for any other class or series of Junior Stock;
(iv) the purchase of fractional interests in shares of Junior Stock pursuant to the conversion or exchange provisions of such Junior Stock or the security being converted or exchanged;
(v) the purchase of Junior Stock by an investment banking subsidiary of the Company in connection with the distribution thereof; or
(vi) the purchase of Junior Stock by any investment banking subsidiary of the Company in connection with market-making or other secondary market activities in the ordinary course of the business of such subsidiary.
The restrictions set forth in the preceding provisions of this Section 4(c) shall not apply to any Junior Stock dividends paid by the Company where the dividend is in the form of the same stock (or the right to buy the same stock) as that on which the dividend is being paid.
Except as provided below, for so long as any share of Series O Preferred Stock remains outstanding, if dividends are not declared and paid in full upon the shares of Series O Preferred Stock and any class or series of stock of the Company now existing or hereafter authorized that ranks equally with the Series O Preferred Stock in the payment of dividends, all dividends declared upon shares of Series O Preferred Stock and such other stock will be declared on a proportional basis so that the amount of dividends declared per share will bear to each other the same ratio that accrued dividends for the then-current Dividend Period per share of Series O Preferred Stock and accrued dividends for the then-current Dividend Period per share of such other stock (including, in the case of any such other stock that bears cumulative dividends, all accrued and unpaid dividends) bear to each other.
Subject to the foregoing, and not otherwise, such dividends payable in cash, stock or otherwise, as may be determined by the Board of Directors or any duly authorized committee thereof, may be declared and paid on any other class or series of stock of the Company from time to time out of any funds legally available for such payment, and Holders will not be entitled to participate in those dividends.
Section 5. Liquidation Rights.
(a) Liquidation. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company, Holders shall be entitled, out of funds legally available therefor, before any distribution or payment may be made by the Company or set aside for the holders of any Junior Stock and subject to the rights of the holders of any class or series of stock ranking senior to or on parity with Series O Preferred Stock upon liquidation and the rights of the Company’s depositors and other creditors, to receive in full a liquidating distribution in the amount of the liquidation preference of $25,000 per share (the “Series O Liquidation Preference”), plus any accrued dividends thereon from the last Dividend Payment Date to, but excluding, the date of the liquidation, dissolution or winding up if and to the extent declared but not yet paid. Holders shall not be entitled to any further payments in the event of any such voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company other than what is expressly provided for in this Section 5.
(b) Partial Payment. If the assets of the Company are not sufficient to pay in full the aforesaid liquidation distributions to the Holders and any liquidation distributions owed to holders of any class or series of stock of the Company ranking equally with the Series O Preferred Stock in the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the Company, the amounts paid to the Holders and to the holders of all such equally ranking stock shall be pro rata in accordance with the respective aggregate liquidating distributions to which they would otherwise be entitled.
(c) Merger, Consolidation and Sale of Assets Not Liquidation. For purposes of this Section 5, the sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the property and assets of the Company shall not be deemed a voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, nor shall the merger, consolidation or any other business combination transaction of the Company into or with any other corporation or Person or the merger, consolidation or any other business combination transaction of any other corporation or Person into or with the Company be deemed to be a voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company.
Section 6. Redemption.
(a) Optional Redemption. The Company, at the option of its Board of Directors or any duly authorized committee thereof, may redeem out of funds legally available therefor, (i) in whole or in part, from time to time, the shares of Series O Preferred Stock at the time outstanding, on any Dividend Payment Date on or after March 27, 2020, or (ii) in whole but not in part at any time within 90 days following a Regulatory Capital Event, in each case at a redemption price equal to $25,000 per share plus any declared and unpaid dividends, without accumulation of any undeclared dividends, to but excluding the redemption date, upon notice given as provided in Section 6(b) below.
(b) Notice of Redemption. Notice of every redemption of shares of Series O Preferred Stock shall be mailed by first class mail, postage prepaid, addressed to the Holders of such shares
to be redeemed at their respective last addresses appearing on the stock register of the Company. Such mailing shall be at least 30 days and not more than 60 days before the date fixed for redemption. Any notice mailed as provided in this Section 6(b) shall be conclusively presumed to have been duly given, whether or not the Holder receives such notice, but failure duly to give such notice by mail, or any defect in such notice or in the mailing thereof, to any Holder of shares of Series O Preferred Stock designated for redemption shall not affect the validity of the proceedings for the redemption of any other shares of Series O Preferred Stock. Each notice shall state:
(i) the redemption date;
(ii) the total number of shares of Series O Preferred Stock to be redeemed and, if fewer than all the shares of a Holder are to be redeemed, the number of such shares to be redeemed;
(iii) the redemption price;
(iv) the place or places where the certificates for such shares are to be surrendered for payment of the redemption price, if applicable; and
(v) that dividends on the shares to be redeemed will cease to accrue on the redemption date.
Notwithstanding the foregoing, if the certificates evidencing the shares of Series O Preferred Stock are held of record by a depositary and any related depository shares are held of record by a Depositary or its nominee, the Company may give such notice in any manner permitted by the Depositary.
(c) Partial Redemption. In case of any redemption of only part of the shares of Series O Preferred Stock at the time outstanding, the shares of Series O Preferred Stock to be redeemed shall be selected (i) pro rata from the Holders in proportion to the number of shares of Series O Preferred Stock held by such Holders, (ii) by lot or (iii) in such other manner as the Board of Directors or any duly authorized committee thereof may determine, in its sole discretion, to be fair and equitable; provided, however, that if for so long as the Series O Preferred Stock or depositary shares in respect thereof are listed on the New York Stock Exchange, the foregoing clause (iii) shall apply only if such method of selection is not then prohibited by any then applicable rule of the New York Stock Exchange or the New York Stock Exchange consents to or grants a waiver or exemption from such rule. Subject to the provisions of this Section 6, the Board of Directors or any duly authorized committee thereof shall have full power and authority to prescribe the terms and conditions upon which shares of Series O Preferred Stock shall be redeemed from time to time.
(d) Effectiveness of Redemption. If notice of redemption has been duly given and if on or before the redemption date specified in the notice all funds necessary for the redemption have been set aside by the Company, separate and apart from its other assets, for the pro rata benefit of the Holders of the shares called for redemption, so as to be and continue to be available therefor,
or deposited by the Company with a bank or trust company selected by the Board of Directors or any duly authorized committee thereof (the “Trust”) in trust for the pro rata benefit of the Holders of the shares called for redemption, then, notwithstanding that any certificate for any share so called for redemption has not been surrendered for cancellation, on and after the redemption date all shares so called for redemption shall cease to be outstanding, all dividends with respect to such shares shall cease to accrue on such redemption date, and all rights with respect to such shares shall forthwith on such redemption date cease and terminate, except only the right of the Holders thereof to receive the amount payable on such redemption from the Trust at any time after the redemption date from the funds so deposited, without interest. The Company shall be entitled to receive, from time to time, from the Trust any interest accrued on such funds, and the Holders of any shares called for redemption shall have no claim to any such interest. Any funds so deposited and unclaimed at the end of three years from the redemption date shall, to the extent permitted by law, be released or repaid to the Company, and in the event of such repayment to the Company, the Holders of the shares so called for redemption shall be deemed to be unsecured creditors of the Company for an amount equivalent to the amount deposited as stated above for the redemption of such shares and so repaid to the Company, but shall in no event be entitled to any interest.
Section 7. Voting Rights.
(a) General. The Holders shall not be entitled to vote on any matter except as set forth in Section 7(b) below or as required by the Delaware General Corporation Law.
(b) Special Voting Right.
(i) Voting Right. If and whenever dividends on the Series O Preferred Stock or any other class or series of preferred stock that ranks on parity with Series O Preferred Stock as to payment of dividends and upon which voting rights equivalent to those granted by this Section 7(b)(i) have been conferred and are exercisable (any such class or series being referred to herein as “dividend parity stock”) have not been paid in an aggregate amount equal, as to any class or series, to at least three semi-annual or six quarterly Dividend Periods, as applicable, (whether consecutive or not) (a “Nonpayment”), the authorized number of directors constituting the Board of Directors shall be increased by two, and the Holders, together with holders of dividend parity stock, shall have the right, voting separately as a single class without regard to class or series (and with voting rights allocated pro rata based on the liquidation preference of each such class or series), to the exclusion of the holders of Common Stock, to elect two directors of the Company to fill such newly created directorships (and to fill any vacancies in the terms of such directorships), provided that it shall be a qualification for election of any such director that the election of such director shall not cause the Company to violate the corporate governance requirements of the New York Stock Exchange (or other exchange on which the Company’s securities may be listed) that listed companies must have a majority of independent directors and further provided that the Board of Directors shall at no time include more than two such directors. Each such director elected by the Holders together with holders of dividend parity stock is a “Preferred Stock Director.”
(ii) Election. The election of the Preferred Stock Directors will take place at any annual meeting of stockholders or any special meeting of the Holders and any dividend parity stock, called as provided herein. At any time after the special voting power has vested pursuant to Section 7(b)(i) above, the secretary of the Company may, and upon the written request (addressed to the secretary at the Company’s principal office) of the holders of at least 20% of the voting power of the Series O Preferred Stock or the holders of at least 20% of the voting power of any series of dividend parity stock (with such voting power measured based on the voting power to elect Preferred Stock Directors), must (unless such request is received less than 90 days before the date fixed for the next annual or special meeting of the stockholders of the Company, in which event such election shall be held at such next annual or special meeting of stockholders), call a special meeting of the holders of Series O Preferred Stock and any dividend parity stock for the purposes of electing Preferred Stock Directors. The Preferred Stock Directors shall each be entitled to one vote per director on any matter.
(iii) Notice of Special Meeting. Notice for a special meeting to elect Preferred Stock Directors will be given in a similar manner to that provided in the Company’s by-laws for a special meeting of the stockholders. If the secretary of the Company does not call a special meeting within 20 days after receipt of any such request, then any Holder may (at the expense of the Company) call such meeting, upon notice as provided in this Section 7(b)(iii), and for that purpose will have access to the stock register of the Company. The Preferred Stock Directors elected at any such special meeting and each Preferred Stock Director elected at a subsequent annual or special meeting of stockholders, will be elected for term expiring upon the earlier of the Preferred Stock Director Termination Date and the next annual meeting of stockholders following such Preferred Stock Director's election. In case any vacancy in the office of a Preferred Stock Director occurs (other than prior to the initial election of the Preferred Stock Directors), the vacancy may be filled by the Preferred Stock Director remaining in office, or if none remains in office, by a plurality of the votes cast by the holders of Series O Preferred Stock and any dividend parity stock, voting together as a single class, and the Preferred Stock Director so appointed or elected to fill such vacancy shall serve for a term expiring at the next annual meeting of the stockholders. Preferred Stock Directors may only be elected by the holders of Series O Preferred Stock and dividend parity stock in accordance with this Section 7. If the holders of Series O Preferred Stock and such dividend parity stock fail to elect a sufficient number of directors to fill all directorships for which they are entitled to elect directors pursuant to this Section 7, then any directorship not so filled shall remain vacant until such time as the holders of Series O Preferred Stock and such dividend parity stock elect a person to fill such directorship in accordance with this Section 7, or such vacancy is otherwise filled in accordance with this Section 7; and no such directorship may be filled by stockholders of the Corporation other than in accordance with this Section 7.
(iv) Termination; Removal. Whenever the Company has paid noncumulative dividends in full for at least two consecutive semi-annual or four consecutive quarterly
Dividend Periods following a Nonpayment on the Series O Preferred Stock and on any dividend parity stock entitled to noncumulative dividends and has paid cumulative dividends in full on any dividend parity stock entitled to cumulative dividends, then the right of the Holders to elect the Preferred Stock Directors will cease (but subject always to the same provisions for the vesting of the special voting rights in the case of any similar non-payment of dividends in respect of future Dividend Periods) (the time of such cessation, the “Preferred Stock Director Termination Date”). Upon a Preferred Stock Director Termination Date, the terms of office of the Preferred Stock Directors will immediately terminate, the persons then serving as Preferred Stock Directors shall immediately cease to be qualified to hold office as Preferred Stock Directors, the Preferred Stock Directors shall cease to be directors of the Company and the number of directors constituting the Board of Directors shall be automatically reduced, without any action by the Board of Directors or the stockholders of the Company, by the number of Preferred Stock Directors authorized immediately prior to such termination. Any Preferred Stock Director may be removed at any time without cause by the holders of a majority of the voting power of outstanding shares of the capital stock then entitled to vote in the election of Preferred Stock Directors, voting together as a single class (with such voting power measured based on the voting power to elect Preferred Stock Directors).
(c) Senior Issuances; Adverse Changes. So long as any shares of Series O Preferred Stock are outstanding, but subject to the final paragraph of this Section 7(c), in addition to any other vote or consent of holders of the Company’s capital stock required by Delaware law, the vote or consent of the holders of at least two-thirds of the voting power of the Series O Preferred Stock and the holders of any other preferred stock entitled to vote thereon, voting together as a single class, given in person or by proxy at an annual or special meeting of stockholders, or given in writing without a meeting, will be necessary for effecting or validating any of the following actions, whether or not such approval is required by Delaware law:
(i) any amendment, alteration or repeal of any provision of the Company’s certificate of incorporation (including the certificate of designations creating the Series O Preferred Stock) or the Company’s by-laws that would alter or change the voting powers, preferences, economic rights or special rights of the Series O Preferred Stock so as to affect them adversely;
(ii) any amendment or alteration of the Company’s certificate of incorporation to authorize or create, or increase the authorized amount of, any shares of, or any securities convertible into shares of, any class or series of the Company's capital stock ranking prior to the Series O Preferred Stock in the payment of dividends or in the distribution of assets on any liquidation, dissolution, or winding up of the Company; or
(iii) the consummation of a binding share exchange or reclassification involving the Series O Preferred Stock or a merger or consolidation of the Company with another entity, except that holders of Series O Preferred Stock will have no right to vote under this provision or otherwise under Delaware law if in each case (i) the Series O Preferred Stock remains outstanding or, in the case of any such merger or consolidation with
respect to which the Company is not the surviving or resulting entity, is converted into or exchanged for preferred securities of the surviving or resulting entity or its ultimate parent, that is an entity organized and existing under the laws of the United States of America, any state thereof or the District of Columbia and that is a corporation for U.S. federal income tax purposes (or if such entity is not a corporation, the Company having received an opinion of nationally recognized counsel experienced in such matters to the effect that Holders will be subject to tax for U.S. federal income tax purposes with respect to such new preferred securities after such merger or consolidation in the same amount, at the same time and otherwise in the same manner as would have been the case under the Series O Preferred Stock prior to such merger or consolidation), and (ii) such Series O Preferred Stock remaining outstanding or such preferred securities, as the case may be, have such rights, preferences, privileges and voting powers, taken as a whole, as are not materially less favorable to the holders thereof than the rights, preferences, privileges and voting powers of the Series O Preferred Stock, taken as a whole;
provided, however, that, for the avoidance of doubt, any increase in the amount of the authorized or issued Series O Preferred Stock or authorized preferred stock or any securities convertible into preferred stock or the creation and issuance, or an increase in the authorized or issued amount, of other series of preferred stock or any securities convertible into preferred stock ranking equally with and/or junior to the Series O Preferred Stock with respect to the payment of dividends (whether such dividends are cumulative or noncumulative) and/or the distribution of assets upon the Company’s liquidation, dissolution or winding up will not be deemed to adversely affect the voting powers, preferences or special rights of the Series O Preferred Stock, and no stockholder will have the right to vote on such an increase, creation or issuance by reason of this Section 7.
If any amendment, alteration, repeal, share exchange, reclassification, merger or consolidation specified in this Section 7(c) would adversely affect the Series O Preferred Stock but not all series of preferred stock of the Company, then only such series of preferred stock as are adversely affected by and entitled to vote on the matter shall vote on the matter together with the Series O Preferred Stock as a single class (in lieu of all other series of preferred stock) for purposes of the vote or consent required by this Section 7(c).
(d) No Vote if Redemption. No vote or consent of the Holders shall be required pursuant to Section 7(b) or 7(c) if, at or prior to the time when the act with respect to such vote or consent would otherwise be required shall be effected, the Company shall have redeemed or shall have called for redemption all outstanding shares of Series O Preferred Stock, with proper notice and sufficient funds having been set aside for such redemption, in each case pursuant to Section 6 above.
Section 8. Preemption and Conversion Rights.
The Holders shall not have any preemptive rights or conversion rights as a result of the terms hereof.
Section 9. Rank.
For the avoidance of doubt, the Board of Directors or any duly authorized committee thereof may, without the vote of the Holders, authorize and issue additional shares of Junior Stock or shares of any class or series of stock of the Company now existing or hereafter authorized that ranks equally with the Series O Preferred Stock in the payment of dividends or in the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the Company.
Section 10. Reacquired Shares.
The Board of Directors shall take such actions as are necessary to cause the shares of Series O Preferred Stock which have been redeemed or otherwise purchased or acquired by the Company to be retired and restored to the status of authorized but unissued shares of preferred stock without designation as to series.
Section 11. No Sinking Fund.
Shares of Series O Preferred Stock are not subject to the operation of a sinking fund.
Section 12. Transfer Agent, Calculation Agent, Registrar and Paying Agent.
The duly appointed Transfer Agent, Calculation Agent, Registrar and paying agent for the Series O Preferred Stock shall be Computershare Trust Company, N.A. The Company may, in its sole discretion, remove the Transfer Agent in accordance with the agreement between the Company and the Transfer Agent; provided, however, that the Company shall appoint a successor transfer agent who shall accept such appointment prior to the effectiveness of such removal. Upon any such removal or appointment, the Company shall send notice thereof by first-class mail, postage prepaid, to the Holders.
Section 13. Replacement Certificates for Mutilated, Destroyed, Stolen and Lost Certificates.
If physical certificates are issued, the Company shall replace any mutilated certificate at the Holder’s expense upon surrender of that certificate to the Transfer Agent. The Company shall replace certificates that become destroyed, stolen or lost at the Holder’s expense upon delivery to the Company and the Transfer Agent of satisfactory evidence that the certificate has been destroyed, stolen or lost, together with any indemnity that may be required by the Transfer Agent and the Company.
Section 14. Form.
(a) Series O Preferred Stock Certificates. Series O Preferred Stock shall be issued in certificated form in substantially the form attached hereto as Exhibit A (each, a “Series O Preferred Stock Certificate”). Exhibit A is hereby incorporated in and expressly made a part of this Certificate of Designations. The Series O Preferred Stock Certificates may have notations, legends or endorsements required by law, stock exchange rules, agreements to which the Company is subject, if any, or usage (provided that any such notation, legend or endorsement is in a form acceptable to the Company).
(b) Signature. Two Officers shall sign any Series O Preferred Stock Certificate for the Company, in accordance with the Company’s by-laws and applicable law, by manual or facsimile signature. If an Officer whose signature is on a Series O Preferred Stock Certificate no longer holds that office at the time the Transfer Agent countersigned the Series O Preferred Stock Certificate, such Series O Preferred Stock Certificate shall be valid nevertheless. A Series O Preferred Stock Certificate shall not be valid until an authorized signatory of the Transfer Agent manually countersigns such Series O Preferred Stock Certificate. Each Series O Preferred Stock Certificate shall be dated the date of its countersignature.
Section 15. Taxes.
(a) Transfer Taxes. The Company shall pay any and all stock transfer, documentary, stamp and similar taxes that may be payable in respect of any issuance or delivery of shares of Series O Preferred Stock. The Company shall not, however, be required to pay any such tax that may be payable in respect of any transfer involved in the issuance or delivery of shares of Series O Preferred Stock, in a name other than that in which the shares of Series O Preferred Stock were registered, or in respect of any payment to any Person other than a payment to the registered holder thereof, and shall not be required to make any such issuance, delivery or payment unless and until the Person otherwise entitled to such issuance, delivery or payment has paid to the Company the amount of any such tax or has established, to the satisfaction of the Company, that such tax has been paid or is not payable.
(b) Withholding. All payments and distributions (or deemed distributions) on the shares of Series O Preferred Stock shall be subject to withholding and backup withholding of tax to the extent required by law, subject to applicable exemptions, and amounts withheld, if any, shall be treated as received by Holders.
Section 16. Notices.
All notices referred to herein shall be in writing, and, unless otherwise specified herein, all notices hereunder shall be deemed to have been given upon the earlier of receipt thereof or three Business Days after the mailing thereof if sent by registered or certified mail (unless first class mail shall be specifically permitted for such notice under the terms of this Certificate of Designations) with postage prepaid, addressed: (i) if to the Company, to its office at 399 Park Avenue, New York, New York 10043 (Attention: Corporate Secretary) or to the Transfer Agent at its office at 250 Royall Street, Canton, Massachusetts 02021, or other agent of the Company
designated as permitted by this Certificate of Designations, or (ii) if to any Holder, to such Holder at the address of such Holder as listed in the stock record books of the Company (which may include the records of the Transfer Agent) or (iii) to such other address as the Company or any such Holder, as the case may be, shall have designated by notice similarly given.
Section 17. Other Rights Disclaimed.
The shares of Series O Preferred Stock have no voting powers, preferences or relative, participating, optional or other special rights, or qualifications, limitations or restrictions thereof, other than as set forth herein or in the Certificate of Incorporation of the Company.
IN WITNESS WHEREOF, this Certificate of Designations has been executed on behalf of the Company by its Chief Accounting Officer this 19th day of March, 2015.
CITIGROUP INC.
By: /s/ Jeffrey R. Walsh____________________
Name: Jeffrey R. Walsh
Title: Chief Accounting Officer
Exhibit A
FORM OF
5.875% FIXED RATE / FLOATING RATE NONCUMULATIVE PREFERRED STOCK, SERIES O
Certificate Number_______ Number of Shares of Series O Preferred Stock______
CUSIP NO.:
CITIGROUP INC.
5.875% Fixed Rate / Floating Rate Noncumulative Preferred Stock, Series O
(par value $1.00 per share)
(liquidation preference $25,000 per share)
Citigroup Inc., a Delaware corporation (the “Company”), hereby certifies that [ ] (the “Holder”) is the registered owner of [ ] fully paid and non-assessable shares of the Company’s designated 5.875% Fixed Rate / Floating Rate Noncumulative Preferred Stock, Series O, with a par value of $1.00 per share and a liquidation preference of $25,000 per share (the “Series O Preferred Stock”). The shares of Series O Preferred Stock are transferable on the books and records of the Registrar, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer. The designations, rights, privileges, restrictions, preferences and other terms and provisions of the Series O Preferred Stock represented hereby are and shall in all respects be subject to the provisions of the Certificate of Designations dated March 19, 2015 as the same may be amended from time to time (the “Certificate of Designations”). Capitalized terms used herein but not defined shall have the meaning given them in the Certificate of Designations. The Company will provide a copy of the Certificate of Designations to a Holder without charge upon written request to the Company at its principal place of business.
Reference is hereby made to select provisions of the Series O Preferred Stock set forth on the reverse hereof, and to the Certificate of Designations, which select provisions and the Certificate of Designations shall for all purposes have the same effect as if set forth at this place.
Upon receipt of this certificate, the Holder is bound by the Certificate of Designations and is entitled to the benefits thereunder.
Unless the Registrar has properly countersigned, these shares of Series O Preferred Stock shall not be entitled to any benefit under the Certificate of Designations or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, this certificate has been executed on behalf of the Company by its [Title] and by its [Title] this __ day of ________, ________.
CITIGROUP INC.
By: _______________________________________
Name:
Title:
By: _______________________________________
Name:
Title:
REGISTRAR’S COUNTERSIGNATURE
These are shares of Series O Preferred Stock referred to in the within-mentioned Certificate of Designations.
Dated:
COMPUTERSHARE TRUST COMPANY, N.A., as Registrar
By: _______________________________________
Name:
Title:
REVERSE OF CERTIFICATE
Dividends on each share of Series O Preferred Stock shall be payable at the rate provided in the Certificate of Designations.
The shares of Series O Preferred Stock shall be redeemable at the option of the Company in the manner and in accordance with the terms set forth in the Certificate of Designations.
The Company shall furnish without charge to each holder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class or series of share capital issued by the Company and the qualifications, limitations or restrictions of such preferences and/or rights.
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers the shares of Series O Preferred Stock evidenced hereby to:
___________________________________________________
___________________________________________________
(Insert assignee’s social security or taxpayer identification number, if any)
___________________________________________________
___________________________________________________
(Insert address and zip code of assignee)
and irrevocably appoints:
___________________________________________________
___________________________________________________
as agent to transfer the shares of Series O Preferred Stock evidenced hereby on the books of the Transfer Agent. The agent may substitute another to act for him or her.
Date:
Signature:
___________________________________________________
(Sign exactly as your name appears on the other side of this Certificate)
Signature Guarantee: ___________________________________________________
(Signature must be guaranteed by an “eligible guarantor institution” that is a bank, stockbroker, savings and loan association or credit union meeting the requirements of the Transfer Agent, which requirements include membership or participation in the Securities Transfer Agents Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Transfer Agent in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.)
CERTIFICATE OF DESIGNATIONS
OF
5.950% FIXED RATE / FLOATING RATE NONCUMULATIVE PREFERRED STOCK SERIES P
OF
CITIGROUP INC.
______________________________
pursuant to Sections 103(f) and 151 of the
General Corporation Law of the State of Delaware
______________________________
Citigroup Inc., a Delaware corporation (the “Company”), hereby certifies that:
1. The Restated Certificate of Incorporation of the Company (as amended through the date hereof, the “Certificate of Incorporation”) fixes the total number of shares of all classes of capital stock that the Company shall have the authority to issue at six billion (6,000,000,000) shares of common stock, par value $0.01 per share, and thirty million (30,000,000) shares of preferred stock, par value $1.00 per share.
2. The Certificate of Incorporation expressly grants to the Board of Directors of the Company (the “Board of Directors”) authority to provide for the issuance of the shares of preferred stock in series, and to establish from time to time the number of shares to be included in each such series and to fix the designation, powers, preferences and rights of the shares of each such series and the qualifications, limitations or restrictions thereof.
3. Pursuant to the authority conferred upon a preferred stock committee (the “Preferred Stock Committee”) by the Board of Directors, the Preferred Stock Committee, by action duly taken on April 20, 2015, adopted resolutions (i) authorizing the issuance and sale of up to 80,000 shares of the Company’s preferred stock and (ii) approving this final form of Certificate of Designations of 5.950% Fixed Rate / Floating Rate Noncumulative Preferred Stock, Series P (the “Series P Preferred Stock”) establishing the number of shares to be included in this Series P Preferred Stock and fixing the designation, powers, preferences and rights of the shares of this Series P Preferred Stock and the qualifications, limitations or restrictions thereof as follows:
Section 1. Designation.
The designation of the series of preferred stock shall be “5.950% Fixed Rate / Floating Rate Noncumulative Preferred Stock, Series P” (the “Series P Preferred Stock”). Each share of Series P Preferred Stock shall be identical in all respects to every other share of Series P Preferred Stock.
Section 2. Number of Shares.
The number of authorized shares of Series P Preferred Stock shall be 80,000. That number from time to time may be increased (but not in excess of the total number of authorized shares of preferred stock) or decreased (but not below the number of shares of Series P Preferred Stock then outstanding) by further resolution duly adopted by the Board of Directors, the Preferred Stock Committee or any other duly authorized committee thereof and by the filing of a certificate pursuant to the provisions of the General Corporation Law of the State of Delaware stating that such increase or reduction, as the case may be, has been so authorized. The Company shall have the authority to issue fractional shares of Series P Preferred Stock.
Section 3. Definitions. As used herein with respect to Series P Preferred Stock:
“Appropriate Federal Banking Agency” means the “appropriate federal banking agency” with respect to the Company as that term is defined in Section 3(q) of the Federal Deposit Insurance Act of 1950, as amended, or any successor provision.
“Board of Directors” has the meaning set forth in the recitals above.
“Business Day” means any weekday that is not a legal holiday in New York City and is not a day on which banking institutions in New York City are authorized or required by law or regulation to be closed.
“Calculation Agent” means the Transfer Agent acting in its capacity as calculation agent for the Series P Preferred Stock, and its successors and assigns.
“Common Stock” means the common stock of the Company, par value $0.01 per share, or any other shares of the capital stock of the Company into which such shares of common stock shall be reclassified or changed.
“Depositary” means DTC or its nominee or any successor depositary appointed by the Company.
“Dividend Payment Date” shall have the meaning set forth in Section 4(a) hereof.
“Dividend Period” shall have the meaning set forth in Section 4(a) hereof.
“Dividend Record Date” shall have the meaning set forth in Section 4(a) hereof.
“DTC” means The Depository Trust Company.
“Holder” means the Person in whose name the shares of the Series P Preferred Stock are registered, which may be treated by the Company, Calculation Agent, Transfer Agent, Registrar
and paying agent as the absolute owner of the shares of Series P Preferred Stock for the purpose of making payment and for all other purposes.
“Junior Stock” means the Common Stock and any other class or series of stock of the
Company now existing or hereafter authorized over which Series P Preferred Stock has
preference or priority in the payment of dividends or in the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the Company.
“LIBOR Determination Date” means the second London Banking Day immediately preceding the first day of the relevant Dividend Period.
“London Banking Day” means any day on which commercial banks are open for general business (including dealings in deposits in United States dollars) in London.
“Nonpayment” shall have the meaning set forth in Section 7(b)(i) hereof.
“Officer” means the Chief Executive Officer, the Chairman, the Chief Administrative Officer, any Vice Chairman, the Chief Financial Officer, the Controller, the Chief Accounting Officer, the Treasurer, any Deputy Treasurer, any Assistant Treasurer, any Vice President, the General Counsel and Corporate Secretary and any Assistant Secretary of the Company.
“Person” means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint-stock company, limited liability company, trust, or other entity.
“Preferred Stock Director” shall have the meaning set forth in Section 7(b)(i) hereof.
“Preferred Stock Director Termination Date” shall have the meaning set forth in Section 7(b)(iv) hereof.
“Registrar” means the Transfer Agent acting in its capacity as registrar for the Series P Preferred Stock, and its successors and assigns.
“Regulatory Capital Event” means the good faith determination by the Company that, as a result of (i) any amendment to, clarification of, or change in, the laws or regulations of the United States or any political subdivision of or in the United States that is enacted or becomes effective after the initial issuance of any share of the Series P Preferred Stock, (ii) any proposed change in those laws or regulations that is announced or becomes effective after the initial issuance of any share of the Series P Preferred Stock, or (iii) any official administrative decision or judicial decision or administrative action or other official pronouncement interpreting or applying those laws or regulations or policies with respect thereto that is announced after the initial issuance of any share of the Series P Preferred Stock, there is more than an insubstantial risk that the Company will not be entitled to treat the full liquidation preference amount of $25,000 per share of the Series P Preferred Stock then outstanding as “tier 1 capital” (or its equivalent) for purposes of the capital adequacy guidelines of the Federal Reserve (or, as and if applicable, the capital adequacy guidelines or regulations of any successor Appropriate Federal Banking Agency) as then in effect and applicable, for so long as any share of the Series P Preferred Stock is outstanding.
“Reuters LIBOR01” means the display designated on the Reuters 3000 Xtra Service on page LIBOR01 Page (or such other page as may replace “Reuters LIBOR01” page on the service or such other service as may be nominated by the British Bankers’ Association or other
administrator of LIBOR for the purpose of displaying London interbank offered rates for United States dollar deposits or loans).
“Series P Preferred Stock” shall have the meaning set forth in Section 1 hereof.
“Series P Preferred Stock Certificate” shall have the meaning set forth in Section 14(a) hereof.
“Three-month LIBOR” means the rate (expressed as a percentage per annum) for deposits in United States dollars for a three-month period commencing on the first day of a Dividend Period that appears on the Reuters LIBOR01 page as of 11:00 a.m. (London time) on the LIBOR Determination Date for that Dividend Period. If such rate does not appear on the Reuters LIBOR01 page, Three-month LIBOR will be determined on the basis of the rates at which deposits in United States dollars for a three-month period commencing on the first day of that Dividend Period and in a principal amount of not less than $1 million are offered to prime banks in the London interbank market by four major banks in the London interbank market selected by the Calculation Agent (after consultation with the Company), at approximately 11:00 a.m., London time, on the LIBOR Determination Date for that Dividend Period. The Calculation Agent will request the principal London office of each of such banks to provide a quotation of its rate. If at least two such quotations are provided, Three-month LIBOR with respect to that Dividend Period will be the arithmetic mean (rounded upward if necessary to the nearest whole multiple of 0.00001%) of such quotations. If fewer than two quotations are provided, Three-month LIBOR with respect to that Dividend Period will be the arithmetic mean (rounded upward if necessary to the nearest whole multiple of 0.00001%) of the rates quoted by three major banks in New York City selected by the Calculation Agent (after consultation with the Company), at approximately 11:00 a.m., New York City time, on the LIBOR Determination Date for that Dividend Period for loans in United States dollars to leading European banks for a three-month period commencing on the first day of that Dividend Period and in a principal amount of not less than $1 million. However, if fewer than three banks selected by the Calculation Agent to provide quotations are quoting as described above, Three-month LIBOR for that Dividend Period will be the same Three-month LIBOR as determined for the previous Dividend Period or, in the case of the Dividend Period beginning on May 15, 2025, 0.2760%. The determination of Three-month LIBOR for each relevant Dividend Period by the Calculation Agent will (in the absence of manifest error) be final and binding.
“Transfer Agent” means Computershare Trust Company, N.A., a federally chartered national association, acting as Transfer Agent, Calculation Agent, Registrar and paying agent for the Series P Preferred Stock, and its successors and assigns.
“Trust” shall have the meaning set forth in Section 6(d).
Section 4. Dividends.
(a) Rate. Holders shall be entitled to receive, when, as and if declared by the Board of Directors or any duly authorized committee thereof, but only out of funds legally available therefor, noncumulative cash dividends on each share of Series P Preferred Stock in the amounts
specified below in this Section 4, and no more, payable (i) semiannually in arrears on each May 15 and November 15 (each, a “Dividend Payment Date”), beginning November 15, 2015, from and including the date of issuance to, but excluding, May 15, 2025; provided, however, if any such day is not a Business Day, then payment of any dividend otherwise payable on that date will be made on the next succeeding day that is a Business Day, without any interest or other payment in respect of such postponement, and (ii) quarterly in arrears on each February 15, May 15, August 15 and November 15, beginning August 15, 2025, from and including May 15, 2025; provided, however, if any such day is not a Business Day, then payment of any dividend otherwise payable on that date will be made on the next succeeding day that is a Business Day, except if that day falls in the next calendar month, in which case, the payment of any dividend otherwise payable will be made on the immediately preceding Business Day, with dividends accruing to the actual payment date (each such day on which dividends are payable for any Dividend Period (as defined below) after the Dividend Period to but excluding May 15, 2025, a “Dividend Payment Date”). The period from and including the date of issuance of the Series P Preferred Stock or any Dividend Payment Date to, but excluding, the next Dividend Payment Date is a “Dividend Period.” Dividends on each share of Series P Preferred Stock will accrue on the liquidation preference of $25,000 per share at a rate per annum equal to (i) 5.950%, for each Dividend Period from and including the date of issuance to, but excluding, May 15, 2025 and (ii) Three-month LIBOR plus 3.905%, for each Dividend Period from and including May 15, 2025. The record date for payment of dividends on the Series P Preferred Stock will be the record date fixed by the Board of Directors or any other duly authorized committee thereof that is not more than 30 nor less than 10 days prior to such Dividend Payment Date (each, a “Dividend Record Date”). Any such day that is a Dividend Record Date will be a Dividend Record Date whether or not such day is a Business Day. The amount of dividends payable on or prior to May 15, 2025 will be computed on the basis of a 360-day year of twelve 30-day months. The amount of dividends payable after May 15, 2025 will be computed on the basis of a 360-day year and the actual number of days elapsed.
(b) Noncumulative Dividends. If the Board of Directors or any duly authorized committee thereof does not declare a dividend on the Series P Preferred Stock for any Dividend Period prior to the related Dividend Payment Date, that dividend will not accrue, and the Company will have no obligation to pay, and Holders shall have no right to receive, a dividend for that Dividend Period on the related Dividend Payment Date or at any future time, whether or not dividends on the Series P Preferred Stock or any other series of preferred stock or common stock are declared for any subsequent period. References herein to the “accrual” of dividends refer only to the determination of the amount of such dividend and do not imply that any right to a dividend arises prior to the date on which a dividend is declared.
(c) Priority of Dividends. So long as any share of Series P Preferred Stock remains outstanding, unless as to a Dividend Payment Date full dividends on all outstanding shares of the Series P Preferred Stock have been declared and paid or declared and a sum sufficient for the payment of those dividends has been set aside for the Dividend Period then ending, the Company will not, and will cause its subsidiaries not to, during the next succeeding Dividend Period that commences on such Dividend Payment Date, declare or pay any dividend on, make any
distributions relating to, or redeem, purchase, acquire or make a liquidation payment relating to, any Junior Stock, or make any guarantee payment with respect thereto, other than:
(i) purchases, redemptions or other acquisitions of shares of Junior Stock in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of employees, officers, directors or consultants;
(ii) purchases of shares of Common Stock pursuant to a contractually binding requirement to buy stock existing prior to the commencement of the then-current Dividend Period, including under a contractually binding stock repurchase plan;
(iii) as a result of an exchange or conversion of any class or series of Junior Stock for any other class or series of Junior Stock;
(iv) the purchase of fractional interests in shares of Junior Stock pursuant to the conversion or exchange provisions of such Junior Stock or the security being converted or exchanged;
(v) the purchase of Junior Stock by an investment banking subsidiary of the Company in connection with the distribution thereof; or
(vi) the purchase of Junior Stock by any investment banking subsidiary of the Company in connection with market-making or other secondary market activities in the ordinary course of the business of such subsidiary.
The restrictions set forth in the preceding provisions of this Section 4(c) shall not apply to any Junior Stock dividends paid by the Company where the dividend is in the form of the same stock (or the right to buy the same stock) as that on which the dividend is being paid.
Except as provided below, for so long as any share of Series P Preferred Stock remains outstanding, if dividends are not declared and paid in full upon the shares of Series P Preferred Stock and any class or series of stock of the Company now existing or hereafter authorized that ranks equally with the Series P Preferred Stock in the payment of dividends, all dividends declared upon shares of Series P Preferred Stock and such other stock will be declared on a proportional basis so that the amount of dividends declared per share will bear to each other the same ratio that accrued dividends for the then-current Dividend Period per share of Series P Preferred Stock and accrued dividends for the then-current Dividend Period per share of such other stock (including, in the case of any such other stock that bears cumulative dividends, all accrued and unpaid dividends) bear to each other.
Subject to the foregoing, and not otherwise, such dividends payable in cash, stock or otherwise, as may be determined by the Board of Directors or any duly authorized committee thereof, may be declared and paid on any other class or series of stock of the Company from time to time out of any funds legally available for such payment, and Holders will not be entitled to participate in those dividends.
Section 5. Liquidation Rights.
(a) Liquidation. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company, Holders shall be entitled, out of funds legally available therefor, before any distribution or payment may be made by the Company or set aside for the holders of any Junior Stock and subject to the rights of the holders of any class or series of stock ranking senior to or on parity with Series P Preferred Stock upon liquidation and the rights of the Company’s depositors and other creditors, to receive in full a liquidating distribution in the amount of the liquidation preference of $25,000 per share (the “Series P Liquidation Preference”), plus any accrued dividends thereon from the last Dividend Payment Date to, but excluding, the date of the liquidation, dissolution or winding up if and to the extent declared but not yet paid. Holders shall not be entitled to any further payments in the event of any such voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company other than what is expressly provided for in this Section 5.
(b) Partial Payment. If the assets of the Company are not sufficient to pay in full the aforesaid liquidation distributions to the Holders and any liquidation distributions owed to holders of any class or series of stock of the Company ranking equally with the Series P Preferred Stock in the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the Company, the amounts paid to the Holders and to the holders of all such equally ranking stock shall be pro rata in accordance with the respective aggregate liquidating distributions to which they would otherwise be entitled.
(c) Merger, Consolidation and Sale of Assets Not Liquidation. For purposes of this Section 5, the sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the property and assets of the Company shall not be deemed a voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, nor shall the merger, consolidation or any other business combination transaction of the Company into or with any other corporation or Person or the merger, consolidation or any other business combination transaction of any other corporation or Person into or with the Company be deemed to be a voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company.
Section 6. Redemption.
(a) Optional Redemption. The Company, at the option of its Board of Directors or any duly authorized committee thereof, may redeem out of funds legally available therefor, (i) in whole or in part, from time to time, the shares of Series P Preferred Stock at the time outstanding, on any Dividend Payment Date on or after May 15, 2025, or (ii) in whole but not in part at any time within 90 days following a Regulatory Capital Event, in each case at a redemption price equal to $25,000 per share plus any declared and unpaid dividends, without accumulation of any undeclared dividends, to but excluding the redemption date, upon notice given as provided in Section 6(b) below.
(b) Notice of Redemption. Notice of every redemption of shares of Series P Preferred Stock shall be mailed by first class mail, postage prepaid, addressed to the Holders of such shares
to be redeemed at their respective last addresses appearing on the stock register of the Company. Such mailing shall be at least 30 days and not more than 60 days before the date fixed for redemption. Any notice mailed as provided in this Section 6(b) shall be conclusively presumed to have been duly given, whether or not the Holder receives such notice, but failure duly to give such notice by mail, or any defect in such notice or in the mailing thereof, to any Holder of shares of Series P Preferred Stock designated for redemption shall not affect the validity of the proceedings for the redemption of any other shares of Series P Preferred Stock. Each notice shall state:
(i) the redemption date;
(ii) the total number of shares of Series P Preferred Stock to be redeemed and, if fewer than all the shares of a Holder are to be redeemed, the number of such shares to be redeemed;
(iii) the redemption price;
(iv) the place or places where the certificates for such shares are to be surrendered for payment of the redemption price, if applicable; and
(v) that dividends on the shares to be redeemed will cease to accrue on the redemption date.
Notwithstanding the foregoing, if the certificates evidencing the shares of Series P Preferred Stock are held of record by a depositary and any related depository shares are held of record by a Depositary or its nominee, the Company may give such notice in any manner permitted by the Depositary.
(c) Partial Redemption. In case of any redemption of only part of the shares of Series P Preferred Stock at the time outstanding, the shares of Series P Preferred Stock to be redeemed shall be selected (i) pro rata from the Holders in proportion to the number of shares of Series P Preferred Stock held by such Holders, (ii) by lot or (iii) in such other manner as the Board of Directors or any duly authorized committee thereof may determine, in its sole discretion, to be fair and equitable; provided, however, that if for so long as the Series P Preferred Stock or depositary shares in respect thereof are listed on the New York Stock Exchange, the foregoing clause (iii) shall apply only if such method of selection is not then prohibited by any then applicable rule of the New York Stock Exchange or the New York Stock Exchange consents to or grants a waiver or exemption from such rule. Subject to the provisions of this Section 6, the Board of Directors or any duly authorized committee thereof shall have full power and authority to prescribe the terms and conditions upon which shares of Series P Preferred Stock shall be redeemed from time to time.
(d) Effectiveness of Redemption. If notice of redemption has been duly given and if on or before the redemption date specified in the notice all funds necessary for the redemption have been set aside by the Company, separate and apart from its other assets, for the pro rata benefit of the Holders of the shares called for redemption, so as to be and continue to be available therefor,
or deposited by the Company with a bank or trust company selected by the Board of Directors or any duly authorized committee thereof (the “Trust”) in trust for the pro rata benefit of the Holders of the shares called for redemption, then, notwithstanding that any certificate for any share so called for redemption has not been surrendered for cancellation, on and after the redemption date all shares so called for redemption shall cease to be outstanding, all dividends with respect to such shares shall cease to accrue on such redemption date, and all rights with respect to such shares shall forthwith on such redemption date cease and terminate, except only the right of the Holders thereof to receive the amount payable on such redemption from the Trust at any time after the redemption date from the funds so deposited, without interest. The Company shall be entitled to receive, from time to time, from the Trust any interest accrued on such funds, and the Holders of any shares called for redemption shall have no claim to any such interest. Any funds so deposited and unclaimed at the end of three years from the redemption date shall, to the extent permitted by law, be released or repaid to the Company, and in the event of such repayment to the Company, the Holders of the shares so called for redemption shall be deemed to be unsecured creditors of the Company for an amount equivalent to the amount deposited as stated above for the redemption of such shares and so repaid to the Company, but shall in no event be entitled to any interest.
Section 7. Voting Rights.
(a) General. The Holders shall not be entitled to vote on any matter except as set forth in Section 7(b) below or as required by the Delaware General Corporation Law.
(b) Special Voting Right.
(i) Voting Right. If and whenever dividends on the Series P Preferred Stock or any other class or series of preferred stock that ranks on parity with Series P Preferred Stock as to payment of dividends and upon which voting rights equivalent to those granted by this Section 7(b)(i) have been conferred and are exercisable (any such class or series being referred to herein as “dividend parity stock”) have not been paid in an aggregate amount equal, as to any class or series, to at least three semi-annual or six quarterly Dividend Periods, as applicable, (whether consecutive or not) (a “Nonpayment”), the authorized number of directors constituting the Board of Directors shall be increased by two, and the Holders, together with holders of dividend parity stock, shall have the right, voting separately as a single class without regard to class or series (and with voting rights allocated pro rata based on the liquidation preference of each such class or series), to the exclusion of the holders of Common Stock, to elect two directors of the Company to fill such newly created directorships (and to fill any vacancies in the terms of such directorships), provided that it shall be a qualification for election of any such director that the election of such director shall not cause the Company to violate the corporate governance requirements of the New York Stock Exchange (or other exchange on which the Company’s securities may be listed) that listed companies must have a majority of independent directors and further provided that the Board of Directors shall at no time include more than two such directors. Each such director elected by the Holders together with holders of dividend parity stock is a “Preferred Stock Director.”
(ii) Election. The election of the Preferred Stock Directors will take place at any annual meeting of stockholders or any special meeting of the Holders and any dividend parity stock, called as provided herein. At any time after the special voting power has vested pursuant to Section 7(b)(i) above, the secretary of the Company may, and upon the written request (addressed to the secretary at the Company’s principal office) of the holders of at least 20% of the voting power of the Series P Preferred Stock or the holders of at least 20% of the voting power of any series of dividend parity stock (with such voting power measured based on the voting power to elect Preferred Stock Directors), must (unless such request is received less than 90 days before the date fixed for the next annual or special meeting of the stockholders of the Company, in which event such election shall be held at such next annual or special meeting of stockholders), call a special meeting of the holders of Series P Preferred Stock and any dividend parity stock for the purposes of electing Preferred Stock Directors. The Preferred Stock Directors shall each be entitled to one vote per director on any matter.
(iii) Notice of Special Meeting. Notice for a special meeting to elect Preferred Stock Directors will be given in a similar manner to that provided in the Company’s by-laws for a special meeting of the stockholders. If the secretary of the Company does not call a special meeting within 20 days after receipt of any such request, then any Holder may (at the expense of the Company) call such meeting, upon notice as provided in this Section 7(b)(iii), and for that purpose will have access to the stock register of the Company. The Preferred Stock Directors elected at any such special meeting and each Preferred Stock Director elected at a subsequent annual or special meeting of stockholders, will be elected for term expiring upon the earlier of the Preferred Stock Director Termination Date and the next annual meeting of stockholders following such Preferred Stock Director's election. In case any vacancy in the office of a Preferred Stock Director occurs (other than prior to the initial election of the Preferred Stock Directors), the vacancy may be filled by the Preferred Stock Director remaining in office, or if none remains in office, by a plurality of the votes cast by the holders of Series P Preferred Stock and any dividend parity stock, voting together as a single class, and the Preferred Stock Director so appointed or elected to fill such vacancy shall serve for a term expiring at the next annual meeting of the stockholders. Preferred Stock Directors may only be elected by the holders of Series P Preferred Stock and dividend parity stock in accordance with this Section 7. If the holders of Series P Preferred Stock and such dividend parity stock fail to elect a sufficient number of directors to fill all directorships for which they are entitled to elect directors pursuant to this Section 7, then any directorship not so filled shall remain vacant until such time as the holders of Series P Preferred Stock and such dividend parity stock elect a person to fill such directorship in accordance with this Section 7, or such vacancy is otherwise filled in accordance with this Section 7; and no such directorship may be filled by stockholders of the Corporation other than in accordance with this Section 7.
(iv) Termination; Removal. Whenever the Company has paid noncumulative dividends in full for at least two consecutive semi-annual or four consecutive quarterly
Dividend Periods following a Nonpayment on the Series P Preferred Stock and on any dividend parity stock entitled to noncumulative dividends and has paid cumulative dividends in full on any dividend parity stock entitled to cumulative dividends, then the right of the Holders to elect the Preferred Stock Directors will cease (but subject always to the same provisions for the vesting of the special voting rights in the case of any similar non-payment of dividends in respect of future Dividend Periods) (the time of such cessation, the “Preferred Stock Director Termination Date”). Upon a Preferred Stock Director Termination Date, the terms of office of the Preferred Stock Directors will immediately terminate, the persons then serving as Preferred Stock Directors shall immediately cease to be qualified to hold office as Preferred Stock Directors, the Preferred Stock Directors shall cease to be directors of the Company and the number of directors constituting the Board of Directors shall be automatically reduced, without any action by the Board of Directors or the stockholders of the Company, by the number of Preferred Stock Directors authorized immediately prior to such termination. Any Preferred Stock Director may be removed at any time without cause by the holders of a majority of the voting power of outstanding shares of the capital stock then entitled to vote in the election of Preferred Stock Directors, voting together as a single class (with such voting power measured based on the voting power to elect Preferred Stock Directors).
(c) Senior Issuances; Adverse Changes. So long as any shares of Series P Preferred Stock are outstanding, but subject to the final paragraph of this Section 7(c), in addition to any other vote or consent of holders of the Company’s capital stock required by Delaware law, the vote or consent of the holders of at least two-thirds of the voting power of the Series P Preferred Stock and the holders of any other preferred stock entitled to vote thereon, voting together as a single class, given in person or by proxy at an annual or special meeting of stockholders, or given in writing without a meeting, will be necessary for effecting or validating any of the following actions, whether or not such approval is required by Delaware law:
(i) any amendment, alteration or repeal of any provision of the Company’s certificate of incorporation (including the certificate of designations creating the Series P Preferred Stock) or the Company’s by-laws that would alter or change the voting powers, preferences, economic rights or special rights of the Series P Preferred Stock so as to affect them adversely;
(ii) any amendment or alteration of the Company’s certificate of incorporation to authorize or create, or increase the authorized amount of, any shares of, or any securities convertible into shares of, any class or series of the Company's capital stock ranking prior to the Series P Preferred Stock in the payment of dividends or in the distribution of assets on any liquidation, dissolution, or winding up of the Company; or
(iii) the consummation of a binding share exchange or reclassification involving the Series P Preferred Stock or a merger or consolidation of the Company with another entity, except that holders of Series P Preferred Stock will have no right to vote under this provision or otherwise under Delaware law if in each case (i) the Series P Preferred Stock remains outstanding or, in the case of any such merger or consolidation with respect to
which the Company is not the surviving or resulting entity, is converted into or exchanged for preferred securities of the surviving or resulting entity or its ultimate parent, that is an entity organized and existing under the laws of the United States of America, any state thereof or the District of Columbia and that is a corporation for U.S. federal income tax purposes (or if such entity is not a corporation, the Company having received an opinion of nationally recognized counsel experienced in such matters to the effect that Holders will be subject to tax for U.S. federal income tax purposes with respect to such new preferred securities after such merger or consolidation in the same amount, at the same time and otherwise in the same manner as would have been the case under the Series P Preferred Stock prior to such merger or consolidation), and (ii) such Series P Preferred Stock remaining outstanding or such preferred securities, as the case may be, have such rights, preferences, privileges and voting powers, taken as a whole, as are not materially less favorable to the holders thereof than the rights, preferences, privileges and voting powers of the Series P Preferred Stock, taken as a whole;
provided, however, that, for the avoidance of doubt, any increase in the amount of the authorized or issued Series P Preferred Stock or authorized preferred stock or any securities convertible into preferred stock or the creation and issuance, or an increase in the authorized or issued amount, of other series of preferred stock or any securities convertible into preferred stock ranking equally with and/or junior to the Series P Preferred Stock with respect to the payment of dividends (whether such dividends are cumulative or noncumulative) and/or the distribution of assets upon the Company’s liquidation, dissolution or winding up will not be deemed to adversely affect the voting powers, preferences or special rights of the Series P Preferred Stock, and no stockholder will have the right to vote on such an increase, creation or issuance by reason of this Section 7.
If any amendment, alteration, repeal, share exchange, reclassification, merger or consolidation specified in this Section 7(c) would adversely affect the Series P Preferred Stock but not all series of preferred stock of the Company, then only such series of preferred stock as are adversely affected by and entitled to vote on the matter shall vote on the matter together with the Series P Preferred Stock as a single class (in lieu of all other series of preferred stock) for purposes of the vote or consent required by this Section 7(c).
(d) No Vote if Redemption. No vote or consent of the Holders shall be required pursuant to Section 7(b) or 7(c) if, at or prior to the time when the act with respect to such vote or consent would otherwise be required shall be effected, the Company shall have redeemed or shall have called for redemption all outstanding shares of Series P Preferred Stock, with proper notice and sufficient funds having been set aside for such redemption, in each case pursuant to Section 6 above.
Section 8. Preemption and Conversion Rights.
The Holders shall not have any preemptive rights or conversion rights as a result of the terms hereof.
Section 9. Rank.
For the avoidance of doubt, the Board of Directors or any duly authorized committee thereof may, without the vote of the Holders, authorize and issue additional shares of Junior Stock or shares of any class or series of stock of the Company now existing or hereafter authorized that ranks equally with the Series P Preferred Stock in the payment of dividends or in the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the Company.
Section 10. Reacquired Shares.
The Board of Directors shall take such actions as are necessary to cause the shares of Series P Preferred Stock which have been redeemed or otherwise purchased or acquired by the Company to be retired and restored to the status of authorized but unissued shares of preferred stock without designation as to series.
Section 11. No Sinking Fund.
Shares of Series P Preferred Stock are not subject to the operation of a sinking fund.
Section 12. Transfer Agent, Calculation Agent, Registrar and Paying Agent.
The duly appointed Transfer Agent, Calculation Agent, Registrar and paying agent for the Series P Preferred Stock shall be Computershare Trust Company, N.A. The Company may, in its sole discretion, remove the Transfer Agent in accordance with the agreement between the Company and the Transfer Agent; provided, however, that the Company shall appoint a successor transfer agent who shall accept such appointment prior to the effectiveness of such removal. Upon any such removal or appointment, the Company shall send notice thereof by first-class mail, postage prepaid, to the Holders.
Section 13. Replacement Certificates for Mutilated, Destroyed, Stolen and Lost Certificates.
If physical certificates are issued, the Company shall replace any mutilated certificate at the Holder’s expense upon surrender of that certificate to the Transfer Agent. The Company shall replace certificates that become destroyed, stolen or lost at the Holder’s expense upon delivery to the Company and the Transfer Agent of satisfactory evidence that the certificate has been destroyed, stolen or lost, together with any indemnity that may be required by the Transfer Agent and the Company.
Section 14. Form.
(a) Series P Preferred Stock Certificates. Series P Preferred Stock shall be issued in certificated form in substantially the form attached hereto as Exhibit A (each, a “Series P Preferred Stock Certificate”). Exhibit A is hereby incorporated in and expressly made a part of this Certificate of Designations. The Series P Preferred Stock Certificates may have notations, legends or endorsements required by law, stock exchange rules, agreements to which the Company is subject, if any, or usage (provided that any such notation, legend or endorsement is in a form acceptable to the Company).
(b) Signature. Two Officers shall sign any Series P Preferred Stock Certificate for the Company, in accordance with the Company’s by-laws and applicable law, by manual or facsimile signature. If an Officer whose signature is on a Series P Preferred Stock Certificate no longer holds that office at the time the Transfer Agent countersigned the Series P Preferred Stock Certificate, such Series P Preferred Stock Certificate shall be valid nevertheless. A Series P Preferred Stock Certificate shall not be valid until an authorized signatory of the Transfer Agent manually countersigns such Series P Preferred Stock Certificate. Each Series P Preferred Stock Certificate shall be dated the date of its countersignature.
Section 15. Taxes.
(a) Transfer Taxes. The Company shall pay any and all stock transfer, documentary, stamp and similar taxes that may be payable in respect of any issuance or delivery of shares of Series P Preferred Stock. The Company shall not, however, be required to pay any such tax that may be payable in respect of any transfer involved in the issuance or delivery of shares of Series P Preferred Stock, in a name other than that in which the shares of Series P Preferred Stock were registered, or in respect of any payment to any Person other than a payment to the registered holder thereof, and shall not be required to make any such issuance, delivery or payment unless and until the Person otherwise entitled to such issuance, delivery or payment has paid to the Company the amount of any such tax or has established, to the satisfaction of the Company, that such tax has been paid or is not payable.
(b) Withholding. All payments and distributions (or deemed distributions) on the shares of Series P Preferred Stock shall be subject to withholding and backup withholding of tax to the extent required by law, subject to applicable exemptions, and amounts withheld, if any, shall be treated as received by Holders.
Section 16. Notices.
All notices referred to herein shall be in writing, and, unless otherwise specified herein, all notices hereunder shall be deemed to have been given upon the earlier of receipt thereof or three Business Days after the mailing thereof if sent by registered or certified mail (unless first class mail shall be specifically permitted for such notice under the terms of this Certificate of Designations) with postage prepaid, addressed: (i) if to the Company, to its office at 399 Park Avenue, New York, New York 10043 (Attention: Corporate Secretary) or to the Transfer Agent at its office at 250 Royall Street, Canton, Massachusetts 02021, or other agent of the Company
designated as permitted by this Certificate of Designations, or (ii) if to any Holder, to such Holder at the address of such Holder as listed in the stock record books of the Company (which may include the records of the Transfer Agent) or (iii) to such other address as the Company or any such Holder, as the case may be, shall have designated by notice similarly given.
Section 17. Other Rights Disclaimed.
The shares of Series P Preferred Stock have no voting powers, preferences or relative, participating, optional or other special rights, or qualifications, limitations or restrictions thereof, other than as set forth herein or in the Certificate of Incorporation of the Company.
IN WITNESS WHEREOF, this Certificate of Designations has been executed on behalf of the Company by its Chief Accounting Officer this 23rd day of April, 2015.
CITIGROUP INC.
By: _/s/ Jeffrey R. Walsh_______________________
Name: Jeffrey R. Walsh
Title: Chief Accounting Officer
Exhibit A
FORM OF
5.950% FIXED RATE / FLOATING RATE NONCUMULATIVE PREFERRED STOCK, SERIES P
Certificate Number_______ Number of Shares of Series P Preferred Stock______
CUSIP NO.:
CITIGROUP INC.
5.950% Fixed Rate / Floating Rate Noncumulative Preferred Stock, Series P
(par value $1.00 per share)
(liquidation preference $25,000 per share)
Citigroup Inc., a Delaware corporation (the “Company”), hereby certifies that [ ] (the “Holder”) is the registered owner of [ ] fully paid and non-assessable shares of the Company’s designated 5.950% Fixed Rate / Floating Rate Noncumulative Preferred Stock, Series P, with a par value of $1.00 per share and a liquidation preference of $25,000 per share (the “Series P Preferred Stock”). The shares of Series P Preferred Stock are transferable on the books and records of the Registrar, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer. The designations, rights, privileges, restrictions, preferences and other terms and provisions of the Series P Preferred Stock represented hereby are and shall in all respects be subject to the provisions of the Certificate of Designations dated April 23, 2015 as the same may be amended from time to time (the “Certificate of Designations”). Capitalized terms used herein but not defined shall have the meaning given them in the Certificate of Designations. The Company will provide a copy of the Certificate of Designations to a Holder without charge upon written request to the Company at its principal place of business.
Reference is hereby made to select provisions of the Series P Preferred Stock set forth on the reverse hereof, and to the Certificate of Designations, which select provisions and the Certificate of Designations shall for all purposes have the same effect as if set forth at this place.
Upon receipt of this certificate, the Holder is bound by the Certificate of Designations and is entitled to the benefits thereunder.
Unless the Registrar has properly countersigned, these shares of Series P Preferred Stock shall not be entitled to any benefit under the Certificate of Designations or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, this certificate has been executed on behalf of the Company by its [Title] and by its [Title] this __ day of ________, ________.
CITIGROUP INC.
By: _______________________________________
Name:
Title:
By: _______________________________________
Name:
Title:
REGISTRAR’S COUNTERSIGNATURE
These are shares of Series P Preferred Stock referred to in the within-mentioned Certificate of Designations.
Dated:
COMPUTERSHARE TRUST COMPANY, N.A., as Registrar
By: _______________________________________
Name:
Title:
REVERSE OF CERTIFICATE
Dividends on each share of Series P Preferred Stock shall be payable at the rate provided in the Certificate of Designations.
The shares of Series P Preferred Stock shall be redeemable at the option of the Company in the manner and in accordance with the terms set forth in the Certificate of Designations.
The Company shall furnish without charge to each holder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class or series of share capital issued by the Company and the qualifications, limitations or restrictions of such preferences and/or rights.
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers the shares of Series P Preferred Stock evidenced hereby to:
___________________________________________________
___________________________________________________
(Insert assignee’s social security or taxpayer identification number, if any)
___________________________________________________
___________________________________________________
(Insert address and zip code of assignee)
and irrevocably appoints:
___________________________________________________
___________________________________________________
as agent to transfer the shares of Series P Preferred Stock evidenced hereby on the books of the Transfer Agent. The agent may substitute another to act for him or her.
Date:
Signature:
___________________________________________________
(Sign exactly as your name appears on the other side of this Certificate)
Signature Guarantee: ___________________________________________________
(Signature must be guaranteed by an “eligible guarantor institution” that is a bank, stockbroker, savings and loan association or credit union meeting the requirements of the Transfer Agent, which requirements include membership or participation in the Securities Transfer Agents Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Transfer Agent in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.)
CERTIFICATE OF DESIGNATIONS
OF
5.950 % FIXED RATE / FLOATING RATE NONCUMULATIVE PREFERRED STOCK SERIES Q
OF
CITIGROUP INC.
______________________________
pursuant to Sections 151 of the
General Corporation Law of the State of Delaware
______________________________
Citigroup Inc., a Delaware corporation (the “Company”), hereby certifies that:
1. The Restated Certificate of Incorporation of the Company (as amended through the date hereof, the “Certificate of Incorporation”) fixes the total number of shares of all classes of capital stock that the Company shall have the authority to issue at six billion (6,000,000,000) shares of common stock, par value $0.01 per share, and thirty million (30,000,000) shares of preferred stock, par value $1.00 per share.
2. The Certificate of Incorporation expressly grants to the Board of Directors of the Company (the “Board of Directors”) authority to provide for the issuance of the shares of preferred stock in series, and to establish from time to time the number of shares to be included in each such series and to fix the designation, powers, preferences and rights of the shares of each such series and the qualifications, limitations or restrictions thereof.
3. Pursuant to the authority conferred upon a preferred stock committee (the “Preferred Stock Committee”) by the Board of Directors, the Preferred Stock Committee, by action duly taken on August 5, 2015, adopted resolutions (i) authorizing the issuance and sale of up to 50,000 shares of the Company’s preferred stock and (ii) approving this final form of Certificate of Designations of 5.950% Fixed Rate / Floating Rate Noncumulative Preferred Stock, Series Q (the “Series Q Preferred Stock”) establishing the number of shares to be included in this Series Q Preferred Stock and fixing the designation, powers, preferences and rights of the shares of this Series Q Preferred Stock and the qualifications, limitations or restrictions thereof as follows:
Section 1. Designation.
The designation of the Series of preferred stock shall be “5.950% Fixed Rate / Floating Rate Noncumulative Preferred Stock, Series Q” (the “Series Q Preferred Stock”). Each share of Series Q Preferred Stock shall be identical in all respects to every other share of Series Q Preferred Stock.
Section 2. Number of Shares.
The number of authorized shares of Series Q Preferred Stock shall be 50,000. That number from time to time may be increased (but not in excess of the total number of authorized shares of preferred stock) or decreased (but not below the number of shares of Series Q Preferred Stock then outstanding) by further resolution duly adopted by the Board of Directors, the Preferred Stock Committee or any other duly authorized committee thereof and by the filing of a certificate pursuant to the provisions of the General Corporation Law of the State of Delaware stating that such increase or reduction, as the case may be, has been so authorized. The Company shall have the authority to issue fractional shares of Series Q Preferred Stock.
Section 3. Definitions. As used herein with respect to Series Q Preferred Stock:
“Appropriate Federal Banking Agency” means the “appropriate federal banking agency” with respect to the Company as that term is defined in Section 3(q) of the Federal Deposit Insurance Act of 1950, as amended, or any successor provision.
“Board of Directors” has the meaning set forth in the recitals above.
“Business Day” means any weekday that is not a legal holiday in New York City and is not a day on which banking institutions in New York City are authorized or required by law or regulation to be closed.
“Calculation Agent” means the Transfer Agent acting in its capacity as calculation agent for the Series Q Preferred Stock, and its successors and assigns.
“Common Stock” means the common stock of the Company, par value $0.01 per share, or any other shares of the capital stock of the Company into which such shares of common stock shall be reclassified or changed.
“Depositary” means DTC or its nominee or any successor depositary appointed by the Company.
“Dividend Payment Date” shall have the meaning set forth in Section 4(a) hereof.
“Dividend Period” shall have the meaning set forth in Section 4(a) hereof.
“Dividend Record Date” shall have the meaning set forth in Section 4(a) hereof.
“DTC” means The Depository Trust Company.
“Holder” means the Person in whose name the shares of the Series Q Preferred Stock are registered, which may be treated by the Company, Calculation Agent, Transfer Agent, Registrar
and paying agent as the absolute owner of the shares of Series Q Preferred Stock for the purpose of making payment and for all other purposes.
“Junior Stock” means the Common Stock and any other class or Series of stock of the
Company now existing or hereafter authorized over which Series Q Preferred Stock has
preference or priority in the payment of dividends or in the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the Company.
“LIBOR Determination Date” means the second London Banking Day immediately preceding the first day of the relevant Dividend Period.
“London Banking Day” means any day on which commercial banks are open for general business (including dealings in deposits in United States dollars) in London.
“Nonpayment” shall have the meaning set forth in Section 7(b)(i) hereof.
“Officer” means the Chief Executive Officer, the Chairman, the Chief Administrative Officer, any Vice Chairman, the Chief Financial Officer, the Controller, the Chief Accounting Officer, the Treasurer, any Deputy Treasurer, any Assistant Treasurer, any Vice President, the General Counsel and Corporate Secretary and any Assistant Secretary of the Company.
“Person” means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint-stock company, limited liability company, trust, or other entity.
“Preferred Stock Director” shall have the meaning set forth in Section 7(b)(i) hereof.
“Preferred Stock Director Termination Date” shall have the meaning set forth in Section 7(b)(iv) hereof.
“Registrar” means the Transfer Agent acting in its capacity as registrar for the Series Q Preferred Stock, and its successors and assigns.
“Regulatory Capital Event” means the good faith determination by the Company that, as a result of (i) any amendment to, clarification of, or change in, the laws or regulations of the United States or any political subdivision of or in the United States that is enacted or becomes effective after the initial issuance of any share of the Series Q Preferred Stock, (ii) any proposed change in those laws or regulations that is announced or becomes effective after the initial issuance of any share of the Series Q Preferred Stock, or (iii) any official administrative decision or judicial decision or administrative action or other official pronouncement interpreting or applying those laws or regulations or policies with respect thereto that is announced after the initial issuance of any share of the Series Q Preferred Stock, there is more than an insubstantial risk that the Company will not be entitled to treat the full liquidation preference amount of $25,000 per share of the Series Q Preferred Stock then outstanding as “tier 1 capital” (or its equivalent) for purposes of the capital adequacy guidelines of the Federal Reserve (or, as and if applicable, the capital adequacy guidelines or regulations of any successor Appropriate Federal Banking Agency) as then in effect and applicable, for so long as any share of the Series Q Preferred Stock is outstanding.
“Reuters LIBOR01” means the display designated on the Reuters 3000 Xtra Service on page LIBOR01 Page (or such other page as may replace “Reuters LIBOR01” page on the service or such other service as may be nominated by the British Bankers’ Association or other
administrator of LIBOR for the purpose of displaying London interbank offered rates for United States dollar deposits or loans).
“Series Q Preferred Stock” shall have the meaning set forth in Section 1 hereof.
“Series Q Preferred Stock Certificate” shall have the meaning set forth in Section 14(a) hereof.
“Three-month LIBOR” means the rate (expressed as a percentage per annum) for deposits in United States dollars for a three-month period commencing on the first day of a Dividend Period that appears on the Reuters LIBOR01 page as of 11:00 a.m. (London time) on the LIBOR Determination Date for that Dividend Period. If such rate does not appear on the Reuters LIBOR01 page, Three-month LIBOR will be determined on the basis of the rates at which deposits in United States dollars for a three-month period commencing on the first day of that Dividend Period and in a principal amount of not less than $1 million are offered to prime banks in the London interbank market by four major banks in the London interbank market selected by the Calculation Agent (after consultation with the Company), at approximately 11:00 a.m., London time, on the LIBOR Determination Date for that Dividend Period. The Calculation Agent will request the principal London office of each of such banks to provide a quotation of its rate. If at least two such quotations are provided, Three-month LIBOR with respect to that Dividend Period will be the arithmetic mean (rounded upward if necessary to the nearest whole multiple of 0.00001%) of such quotations. If fewer than two quotations are provided, Three-month LIBOR with respect to that Dividend Period will be the arithmetic mean (rounded upward if necessary to the nearest whole multiple of 0.00001%) of the rates quoted by three major banks in New York City selected by the Calculation Agent (after consultation with the Company), at approximately 11:00 a.m., New York City time, on the LIBOR Determination Date for that Dividend Period for loans in United States dollars to leading European banks for a three-month period commencing on the first day of that Dividend Period and in a principal amount of not less than $1 million. However, if fewer than three banks selected by the Calculation Agent to provide quotations are quoting as described above, Three-month LIBOR for that Dividend Period will be the same Three-month LIBOR as determined for the previous Dividend Period or, in the case of the Dividend Period beginning on August 15, 2020, 0.30110%. The determination of Three-month LIBOR for each relevant Dividend Period by the Calculation Agent will (in the absence of manifest error) be final and binding.
“Transfer Agent” means Computershare Trust Company, N.A., a federally chartered national association, acting as Transfer Agent, Calculation Agent, Registrar and paying agent for the Series Q Preferred Stock, and its successors and assigns.
“Trust” shall have the meaning set forth in Section 6(d).
Section 4. Dividends.
(a) Rate. Holders shall be entitled to receive, when, as and if declared by the Board of Directors or any duly authorized committee thereof, but only out of funds legally available therefor, noncumulative cash dividends on each share of Series Q Preferred Stock in the amounts
specified below in this Section 4, and no more, payable (i) semiannually in arrears on each February 15 and August 15 (each, a “Dividend Payment Date”), beginning February 15, 2016, from and including the date of issuance to, but excluding, August 15, 2020; provided, however, if any such day is not a Business Day, then payment of any dividend otherwise payable on that date will be made on the next succeeding day that is a Business Day, without any interest or other payment in respect of such postponement, and (ii) quarterly in arrears on each February 15, May 15, August 15 and November 15, beginning November 15, 2020, from and including August 15, 2020; provided, however, if any such day is not a Business Day, then payment of any dividend otherwise payable on that date will be made on the next succeeding day that is a Business Day, except if that day falls in the next calendar month, in which case, the payment of any dividend otherwise payable will be made on the immediately preceding Business Day, with dividends accruing to the actual payment date (each such day on which dividends are payable for any Dividend Period (as defined below) after the Dividend Period to but excluding August 15, 2020, a “Dividend Payment Date”). The period from and including the date of issuance of the Series Q Preferred Stock or any Dividend Payment Date to, but excluding, the next Dividend Payment Date is a “Dividend Period.” Dividends on each share of Series Q Preferred Stock will accrue on the liquidation preference of $25,000 per share at a rate per annum equal to (i) 5.950%, for each Dividend Period from and including the date of issuance to, but excluding, August 15, 2020 and (ii) Three-month LIBOR plus 4.095%, for each Dividend Period from and including August 15, 2020. The record date for payment of dividends on the Series Q Preferred Stock will be the record date fixed by the Board of Directors or any other duly authorized committee thereof that is not more than 30 nor less than 10 days prior to such Dividend Payment Date (each, a “Dividend Record Date”). Any such day that is a Dividend Record Date will be a Dividend Record Date whether or not such day is a Business Day. The amount of dividends payable on or prior to August 15, 2020 will be computed on the basis of a 360-day year of twelve 30-day months. The amount of dividends payable after August 15, 2020 will be computed on the basis of a 360-day year and the actual number of days elapsed.
(b) Noncumulative Dividends. If the Board of Directors or any duly authorized committee thereof does not declare a dividend on the Series Q Preferred Stock for any Dividend Period prior to the related Dividend Payment Date, that dividend will not accrue, and the Company will have no obligation to pay, and Holders shall have no right to receive, a dividend for that Dividend Period on the related Dividend Payment Date or at any future time, whether or not dividends on the Series Q Preferred Stock or any other Series of preferred stock or common stock are declared for any subsequent period. References herein to the “accrual” of dividends refer only to the determination of the amount of such dividend and do not imply that any right to a dividend arises prior to the date on which a dividend is declared.
(c) Priority of Dividends. So long as any share of Series Q Preferred Stock remains outstanding, unless as to a Dividend Payment Date full dividends on all outstanding shares of the Series Q Preferred Stock have been declared and paid or declared and a sum sufficient for the payment of those dividends has been set aside for the Dividend Period then ending, the Company will not, and will cause its subsidiaries not to, during the next succeeding Dividend Period that commences on such Dividend Payment Date, declare or pay any dividend on, make any
distributions relating to, or redeem, purchase, acquire or make a liquidation payment relating to, any Junior Stock, or make any guarantee payment with respect thereto, other than:
(i) purchases, redemptions or other acquisitions of shares of Junior Stock in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of employees, officers, directors or consultants;
(ii) purchases of shares of Common Stock pursuant to a contractually binding requirement to buy stock existing prior to the commencement of the then-current Dividend Period, including under a contractually binding stock repurchase plan;
(iii) as a result of an exchange or conversion of any class or Series of Junior Stock for any other class or Series of Junior Stock;
(iv) the purchase of fractional interests in shares of Junior Stock pursuant to the conversion or exchange provisions of such Junior Stock or the security being converted or exchanged;
(v) the purchase of Junior Stock by an investment banking subsidiary of the Company in connection with the distribution thereof; or
(vi) the purchase of Junior Stock by any investment banking subsidiary of the Company in connection with market-making or other secondary market activities in the ordinary course of the business of such subsidiary.
The restrictions set forth in the preceding provisions of this Section 4(c) shall not apply to any Junior Stock dividends paid by the Company where the dividend is in the form of the same stock (or the right to buy the same stock) as that on which the dividend is being paid.
Except as provided below, for so long as any share of Series Q Preferred Stock remains outstanding, if dividends are not declared and paid in full upon the shares of Series Q Preferred Stock and any class or Series of stock of the Company now existing or hereafter authorized that ranks equally with the Series Q Preferred Stock in the payment of dividends, all dividends declared upon shares of Series Q Preferred Stock and such other stock will be declared on a proportional basis so that the amount of dividends declared per share will bear to each other the same ratio that accrued dividends for the then-current Dividend Period per share of Series Q Preferred Stock and accrued dividends for the then-current Dividend Period per share of such other stock (including, in the case of any such other stock that bears cumulative dividends, all accrued and unpaid dividends) bear to each other.
Subject to the foregoing, and not otherwise, such dividends payable in cash, stock or otherwise, as may be determined by the Board of Directors or any duly authorized committee thereof, may be declared and paid on any other class or Series of stock of the Company from time to time out of any funds legally available for such payment, and Holders will not be entitled to participate in those dividends.
Section 5. Liquidation Rights.
(a) Liquidation. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company, Holders shall be entitled, out of funds legally available therefor, before any distribution or payment may be made by the Company or set aside for the holders of any Junior Stock and subject to the rights of the holders of any class or Series of stock ranking senior to or on parity with Series Q Preferred Stock upon liquidation and the rights of the Company’s depositors and other creditors, to receive in full a liquidating distribution in the amount of the liquidation preference of $25,000 per share (the “Series Q Liquidation Preference”), plus any accrued dividends thereon from the last Dividend Payment Date to, but excluding, the date of the liquidation, dissolution or winding up if and to the extent declared but not yet paid. Holders shall not be entitled to any further payments in the event of any such voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company other than what is expressly provided for in this Section 5.
(b) Partial Payment. If the assets of the Company are not sufficient to pay in full the aforesaid liquidation distributions to the Holders and any liquidation distributions owed to holders of any class or Series of stock of the Company ranking equally with the Series Q Preferred Stock in the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the Company, the amounts paid to the Holders and to the holders of all such equally ranking stock shall be pro rata in accordance with the respective aggregate liquidating distributions to which they would otherwise be entitled.
(c) Merger, Consolidation and Sale of Assets Not Liquidation. For purposes of this Section 5, the sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the property and assets of the Company shall not be deemed a voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, nor shall the merger, consolidation or any other business combination transaction of the Company into or with any other corporation or Person or the merger, consolidation or any other business combination transaction of any other corporation or Person into or with the Company be deemed to be a voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company.
Section 6. Redemption.
(a) Optional Redemption. The Company, at the option of its Board of Directors or any duly authorized committee thereof, may redeem out of funds legally available therefor, (i) in whole or in part, from time to time, the shares of Series Q Preferred Stock at the time outstanding, on any Dividend Payment Date on or after August 15, 2020, or (ii) in whole but not in part at any time within 90 days following a Regulatory Capital Event, in each case at a redemption price equal to $25,000 per share plus any declared and unpaid dividends, without accumulation of any undeclared dividends, to but excluding the redemption date, upon notice given as provided in Section 6(b) below.
(b) Notice of Redemption. Notice of every redemption of shares of Series Q Preferred Stock shall be mailed by first class mail, postage prepaid, addressed to the Holders of such shares
to be redeemed at their respective last addresses appearing on the stock register of the Company. Such mailing shall be at least 30 days and not more than 60 days before the date fixed for redemption. Any notice mailed as provided in this Section 6(b) shall be conclusively presumed to have been duly given, whether or not the Holder receives such notice, but failure duly to give such notice by mail, or any defect in such notice or in the mailing thereof, to any Holder of shares of Series Q Preferred Stock designated for redemption shall not affect the validity of the proceedings for the redemption of any other shares of Series Q Preferred Stock. Each notice shall state:
(i) the redemption date;
(ii) the total number of shares of Series Q Preferred Stock to be redeemed and, if fewer than all the shares of a Holder are to be redeemed, the number of such shares to be redeemed;
(iii) the redemption price;
(iv) the place or places where the certificates for such shares are to be surrendered for payment of the redemption price, if applicable; and
(v) that dividends on the shares to be redeemed will cease to accrue on the redemption date.
Notwithstanding the foregoing, if the certificates evidencing the shares of Series Q Preferred Stock are held of record by a depositary and any related depository shares are held of record by a Depositary or its nominee, the Company may give such notice in any manner permitted by the Depositary.
(c) Partial Redemption. In case of any redemption of only part of the shares of Series Q Preferred Stock at the time outstanding, the shares of Series Q Preferred Stock to be redeemed shall be selected (i) pro rata from the Holders in proportion to the number of shares of Series Q Preferred Stock held by such Holders, (ii) by lot or (iii) in such other manner as the Board of Directors or any duly authorized committee thereof may determine, in its sole discretion, to be fair and equitable. Subject to the provisions of this Section 6, the Board of Directors or any duly authorized committee thereof shall have full power and authority to prescribe the terms and conditions upon which shares of Series Q Preferred Stock shall be redeemed from time to time.
(d) Effectiveness of Redemption. If notice of redemption has been duly given and if on or before the redemption date specified in the notice all funds necessary for the redemption have been set aside by the Company, separate and apart from its other assets, for the pro rata benefit of the Holders of the shares called for redemption, so as to be and continue to be available therefor, or deposited by the Company with a bank or trust company selected by the Board of Directors or any duly authorized committee thereof (the “Trust”) in trust for the pro rata benefit of the Holders of the shares called for redemption, then, notwithstanding that any certificate for any share so called for redemption has not been surrendered for cancellation, on and after the redemption date all shares so called for redemption shall cease to be outstanding, all dividends
with respect to such shares shall cease to accrue on such redemption date, and all rights with respect to such shares shall forthwith on such redemption date cease and terminate, except only the right of the Holders thereof to receive the amount payable on such redemption from the Trust at any time after the redemption date from the funds so deposited, without interest. The Company shall be entitled to receive, from time to time, from the Trust any interest accrued on such funds, and the Holders of any shares called for redemption shall have no claim to any such interest. Any funds so deposited and unclaimed at the end of three years from the redemption date shall, to the extent permitted by law, be released or repaid to the Company, and in the event of such repayment to the Company, the Holders of the shares so called for redemption shall be deemed to be unsecured creditors of the Company for an amount equivalent to the amount deposited as stated above for the redemption of such shares and so repaid to the Company, but shall in no event be entitled to any interest.
Section 7. Voting Rights.
(a) General. The Holders shall not be entitled to vote on any matter except as set forth in Section 7(b) below or as required by the Delaware General Corporation Law.
(b) Special Voting Right.
(i) Voting Right. If and whenever dividends on the Series Q Preferred Stock or any other class or Series of preferred stock that ranks on parity with Series Q Preferred Stock as to payment of dividends and upon which voting rights equivalent to those granted by this Section 7(b)(i) have been conferred and are exercisable (any such class or series being referred to herein as “dividend parity stock”) have not been paid in an aggregate amount equal, as to any class or series, to at least three semi-annual or six quarterly Dividend Periods, as applicable, (whether consecutive or not) (a “Nonpayment”), the authorized number of directors constituting the Board of Directors shall be increased by two, and the Holders, together with holders of dividend parity stock, shall have the right, voting separately as a single class without regard to class or series (and with voting rights allocated pro rata based on the liquidation preference of each such class or series), to the exclusion of the holders of Common Stock, to elect two directors of the Company to fill such newly created directorships (and to fill any vacancies in the terms of such directorships), provided that it shall be a qualification for election of any such director that the election of such director shall not cause the Company to violate the corporate governance requirements of the New York Stock Exchange (or other exchange on which the Company’s securities may be listed) that listed companies must have a majority of independent directors and further provided that the Board of Directors shall at no time include more than two such directors. Each such director elected by the Holders together with holders of dividend parity stock is a “Preferred Stock Director.”
(ii) Election. The election of the Preferred Stock Directors will take place at any annual meeting of stockholders or any special meeting of the Holders and any dividend parity stock, called as provided herein. At any time after the special voting power has vested pursuant to Section 7(b)(i) above, the secretary of the Company may, and upon the
written request (addressed to the secretary at the Company’s principal office) of the holders of at least 20% of the voting power of the Series Q Preferred Stock or the holders of at least 20% of the voting power of any Series of dividend parity stock (with such voting power measured based on the voting power to elect Preferred Stock Directors), must (unless such request is received less than 90 days before the date fixed for the next annual or special meeting of the stockholders of the Company, in which event such election shall be held at such next annual or special meeting of stockholders), call a special meeting of the holders of Series Q Preferred Stock and any dividend parity stock for the purposes of electing Preferred Stock Directors. The Preferred Stock Directors shall each be entitled to one vote per director on any matter.
(iii) Notice of Special Meeting. Notice for a special meeting to elect Preferred Stock Directors will be given in a similar manner to that provided in the Company’s by-laws for a special meeting of the stockholders. If the secretary of the Company does not call a special meeting within 20 days after receipt of any such request, then any Holder may (at the expense of the Company) call such meeting, upon notice as provided in this Section 7(b)(iii), and for that purpose will have access to the stock register of the Company. The Preferred Stock Directors elected at any such special meeting and each Preferred Stock Director elected at a subsequent annual or special meeting of stockholders, will be elected for term expiring upon the earlier of the Preferred Stock Director Termination Date and the next annual meeting of stockholders following such Preferred Stock Director's election. In case any vacancy in the office of a Preferred Stock Director occurs (other than prior to the initial election of the Preferred Stock Directors), the vacancy may be filled by the Preferred Stock Director remaining in office, or if none remains in office, by a plurality of the votes cast by the holders of Series Q Preferred Stock and any dividend parity stock, voting together as a single class, and the Preferred Stock Director so appointed or elected to fill such vacancy shall serve for a term expiring at the next annual meeting of the stockholders. Preferred Stock Directors may only be elected by the holders of Series Q Preferred Stock and dividend parity stock in accordance with this Section 7. If the holders of Series Q Preferred Stock and such dividend parity stock fail to elect a sufficient number of directors to fill all directorships for which they are entitled to elect directors pursuant to this Section 7, then any directorship not so filled shall remain vacant until such time as the holders of Series Q Preferred Stock and such dividend parity stock elect a person to fill such directorship in accordance with this Section 7, or such vacancy is otherwise filled in accordance with this Section 7; and no such directorship may be filled by stockholders of the Corporation other than in accordance with this Section 7.
(iv) Termination; Removal. Whenever the Company has paid noncumulative dividends in full for at least two consecutive semi-annual or four consecutive quarterly Dividend Periods following a Nonpayment on the Series Q Preferred Stock and on any dividend parity stock entitled to noncumulative dividends and has paid cumulative dividends in full on any dividend parity stock entitled to cumulative dividends, then the right of the Holders to elect the Preferred Stock Directors will cease (but subject always to the same provisions for the vesting of the special voting rights in the case of any
similar non-payment of dividends in respect of future Dividend Periods) (the time of such cessation, the “Preferred Stock Director Termination Date”). Upon a Preferred Stock Director Termination Date, the terms of office of the Preferred Stock Directors will immediately terminate, the persons then serving as Preferred Stock Directors shall immediately cease to be qualified to hold office as Preferred Stock Directors, the Preferred Stock Directors shall cease to be directors of the Company and the number of directors constituting the Board of Directors shall be automatically reduced, without any action by the Board of Directors or the stockholders of the Company, by the number of Preferred Stock Directors authorized immediately prior to such termination. Any Preferred Stock Director may be removed at any time without cause by the holders of a majority of the voting power of outstanding shares of the capital stock then entitled to vote in the election of Preferred Stock Directors, voting together as a single class (with such voting power measured based on the voting power to elect Preferred Stock Directors).
(c) Senior Issuances; Adverse Changes. So long as any shares of Series Q Preferred Stock are outstanding, but subject to the final paragraph of this Section 7(c), in addition to any other vote or consent of holders of the Company’s capital stock required by Delaware law, the vote or consent of the holders of at least two-thirds of the voting power of the Series Q Preferred Stock and the holders of any other preferred stock entitled to vote thereon, voting together as a single class, given in person or by proxy at an annual or special meeting of stockholders, or given in writing without a meeting, will be necessary for effecting or validating any of the following actions, whether or not such approval is required by Delaware law:
(i) any amendment, alteration or repeal of any provision of the Company’s certificate of incorporation (including the certificate of designations creating the Series Q Preferred Stock) or the Company’s by-laws that would alter or change the voting powers, preferences, economic rights or special rights of the Series Q Preferred Stock so as to affect them adversely;
(ii) any amendment or alteration of the Company’s certificate of incorporation to authorize or create, or increase the authorized amount of, any shares of, or any securities convertible into shares of, any class or Series of the Company's capital stock ranking prior to the Series Q Preferred Stock in the payment of dividends or in the distribution of assets on any liquidation, dissolution, or winding up of the Company; or
(iii) the consummation of a binding share exchange or reclassification involving the Series Q Preferred Stock or a merger or consolidation of the Company with another entity, except that holders of Series Q Preferred Stock will have no right to vote under this provision or otherwise under Delaware law if in each case (i) the Series Q Preferred Stock remains outstanding or, in the case of any such merger or consolidation with respect to which the Company is not the surviving or resulting entity, is converted into or exchanged for preferred securities of the surviving or resulting entity or its ultimate parent, that is an entity organized and existing under the laws of the United States of America, any state thereof or the District of Columbia and that is a corporation for U.S. federal income tax purposes (or if such entity is not a corporation, the Company having
received an opinion of nationally recognized counsel experienced in such matters to the effect that Holders will be subject to tax for U.S. federal income tax purposes with respect to such new preferred securities after such merger or consolidation in the same amount, at the same time and otherwise in the same manner as would have been the case under the Series Q Preferred Stock prior to such merger or consolidation), and (ii) such Series Q Preferred Stock remaining outstanding or such preferred securities, as the case may be, have such rights, preferences, privileges and voting powers, taken as a whole, as are not materially less favorable to the holders thereof than the rights, preferences, privileges and voting powers of the Series Q Preferred Stock, taken as a whole;
provided, however, that, for the avoidance of doubt, any increase in the amount of the authorized or issued Series Q Preferred Stock or authorized preferred stock or any securities convertible into preferred stock or the creation and issuance, or an increase in the authorized or issued amount, of other Series of preferred stock or any securities convertible into preferred stock ranking equally with and/or junior to the Series Q Preferred Stock with respect to the payment of dividends (whether such dividends are cumulative or noncumulative) and/or the distribution of assets upon the Company’s liquidation, dissolution or winding up will not be deemed to adversely affect the voting powers, preferences or special rights of the Series Q Preferred Stock, and no stockholder will have the right to vote on such an increase, creation or issuance by reason of this Section 7.
If any amendment, alteration, repeal, share exchange, reclassification, merger or consolidation specified in this Section 7(c) would adversely affect the Series Q Preferred Stock but not all Series of preferred stock of the Company, then only such Series of preferred stock as are adversely affected by and entitled to vote on the matter shall vote on the matter together with the Series Q Preferred Stock as a single class (in lieu of all other Series of preferred stock) for purposes of the vote or consent required by this Section 7(c).
(d) No Vote if Redemption. No vote or consent of the Holders shall be required pursuant to Section 7(b) or 7(c) if, at or prior to the time when the act with respect to such vote or consent would otherwise be required shall be effected, the Company shall have redeemed or shall have called for redemption all outstanding shares of Series Q Preferred Stock, with proper notice and sufficient funds having been set aside for such redemption, in each case pursuant to Section 6 above.
Section 8. Preemption and Conversion Rights.
The Holders shall not have any preemptive rights or conversion rights as a result of the terms hereof.
Section 9. Rank.
For the avoidance of doubt, the Board of Directors or any duly authorized committee thereof may, without the vote of the Holders, authorize and issue additional shares of Junior
Stock or shares of any class or Series of stock of the Company now existing or hereafter authorized that ranks equally with the Series Q Preferred Stock in the payment of dividends or in the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the Company.
Section 10. Reacquired Shares.
The Board of Directors shall take such actions as are necessary to cause the shares of Series Q Preferred Stock which have been redeemed or otherwise purchased or acquired by the Company to be retired and restored to the status of authorized but unissued shares of preferred stock without designation as to series.
Section 11. No Sinking Fund.
Shares of Series Q Preferred Stock are not subject to the operation of a sinking fund.
Section 12. Transfer Agent, Calculation Agent, Registrar and Paying Agent.
The duly appointed Transfer Agent, Calculation Agent, Registrar and paying agent for the Series Q Preferred Stock shall be Computershare Trust Company, N.A. The Company may, in its sole discretion, remove the Transfer Agent in accordance with the agreement between the Company and the Transfer Agent; provided, however, that the Company shall appoint a successor transfer agent who shall accept such appointment prior to the effectiveness of such removal. Upon any such removal or appointment, the Company shall send notice thereof by first-class mail, postage prepaid, to the Holders.
Section 13. Replacement Certificates for Mutilated, Destroyed, Stolen and Lost Certificates.
If physical certificates are issued, the Company shall replace any mutilated certificate at the Holder’s expense upon surrender of that certificate to the Transfer Agent. The Company shall replace certificates that become destroyed, stolen or lost at the Holder’s expense upon delivery to the Company and the Transfer Agent of satisfactory evidence that the certificate has been destroyed, stolen or lost, together with any indemnity that may be required by the Transfer Agent and the Company.
Section 14. Form.
(a) Series Q Preferred Stock Certificates. Series Q Preferred Stock shall be issued in certificated form in substantially the form attached hereto as Exhibit A (each, a “Series Q Preferred Stock Certificate”). Exhibit A is hereby incorporated in and expressly made a part of this Certificate of Designations. The Series Q Preferred Stock Certificates may have notations,
legends or endorsements required by law, stock exchange rules, agreements to which the Company is subject, if any, or usage (provided that any such notation, legend or endorsement is in a form acceptable to the Company).
(b) Signature. Two Officers shall sign any Series Q Preferred Stock Certificate for the Company, in accordance with the Company’s by-laws and applicable law, by manual or facsimile signature. If an Officer whose signature is on a Series Q Preferred Stock Certificate no longer holds that office at the time the Transfer Agent countersigned the Series Q Preferred Stock Certificate, such Series Q Preferred Stock Certificate shall be valid nevertheless. A Series Q Preferred Stock Certificate shall not be valid until an authorized signatory of the Transfer Agent manually countersigns such Series Q Preferred Stock Certificate. Each Series Q Preferred Stock Certificate shall be dated the date of its countersignature.
Section 15. Taxes.
(a) Transfer Taxes. The Company shall pay any and all stock transfer, documentary, stamp and similar taxes that may be payable in respect of any issuance or delivery of shares of Series Q Preferred Stock. The Company shall not, however, be required to pay any such tax that may be payable in respect of any transfer involved in the issuance or delivery of shares of Series Q Preferred Stock, in a name other than that in which the shares of Series Q Preferred Stock were registered, or in respect of any payment to any Person other than a payment to the registered holder thereof, and shall not be required to make any such issuance, delivery or payment unless and until the Person otherwise entitled to such issuance, delivery or payment has paid to the Company the amount of any such tax or has established, to the satisfaction of the Company, that such tax has been paid or is not payable.
(b) Withholding. All payments and distributions (or deemed distributions) on the shares of Series Q Preferred Stock shall be subject to withholding and backup withholding of tax to the extent required by law, subject to applicable exemptions, and amounts withheld, if any, shall be treated as received by Holders.
Section 16. Notices.
All notices referred to herein shall be in writing, and, unless otherwise specified herein, all notices hereunder shall be deemed to have been given upon the earlier of receipt thereof or three Business Days after the mailing thereof if sent by registered or certified mail (unless first class mail shall be specifically permitted for such notice under the terms of this Certificate of Designations) with postage prepaid, addressed: (i) if to the Company, to its office at 399 Park Avenue, New York, New York 10043 (Attention: Corporate Secretary) or to the Transfer Agent at its office at 250 Royall Street, Canton, Massachusetts 02021, or other agent of the Company designated as permitted by this Certificate of Designations, or (ii) if to any Holder, to such Holder at the address of such Holder as listed in the stock record books of the Company (which may include the records of the Transfer Agent) or (iii) to such other address as the Company or any such Holder, as the case may be, shall have designated by notice similarly given.
Section 17. Other Rights Disclaimed.
The shares of Series Q Preferred Stock have no voting powers, preferences or relative, participating, optional or other special rights, or qualifications, limitations or restrictions thereof, other than as set forth herein or in the Certificate of Incorporation of the Company.
IN WITNESS WHEREOF, this Certificate of Designations has been executed on behalf of the Company by its Chief Accounting Officer this 11th day of August, 2015.
CITIGROUP INC.
By: /s/ Jeffrey R. Walsh
Name: Jeffrey R. Walsh
Title: Chief Accounting Officer
Exhibit A
FORM OF
5.950 % FIXED RATE / FLOATING RATE NONCUMULATIVE PREFERRED STOCK, SERIES Q
Certificate Number_______ Number of Shares of Series Q Preferred Stock______
CUSIP NO.:
CITIGROUP INC.
5.950% Fixed Rate / Floating Rate Noncumulative Preferred Stock, Series Q
(par value $1.00 per share)
(liquidation preference $25,000 per share)
Citigroup Inc., a Delaware corporation (the “Company”), hereby certifies that [ ] (the “Holder”) is the registered owner of [ ] fully paid and non-assessable shares of the Company’s designated 5.950% Fixed Rate / Floating Rate Noncumulative Preferred Stock, Series Q, with a par value of $1.00 per share and a liquidation preference of $25,000 per share (the “Series Q Preferred Stock”). The shares of Series Q Preferred Stock are transferable on the books and records of the Registrar, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer. The designations, rights, privileges, restrictions, preferences and other terms and provisions of the Series Q Preferred Stock represented hereby are and shall in all respects be subject to the provisions of the Certificate of Designations dated August 11, 2015 as the same may be amended from time to time (the “Certificate of Designations”). Capitalized terms used herein but not defined shall have the meaning given them in the Certificate of Designations. The Company will provide a copy of the Certificate of Designations to a Holder without charge upon written request to the Company at its principal place of business.
Reference is hereby made to select provisions of the Series Q Preferred Stock set forth on the reverse hereof, and to the Certificate of Designations, which select provisions and the Certificate of Designations shall for all purposes have the same effect as if set forth at this place.
Upon receipt of this certificate, the Holder is bound by the Certificate of Designations and is entitled to the benefits thereunder.
Unless the Registrar has properly countersigned, these shares of Series Q Preferred Stock shall not be entitled to any benefit under the Certificate of Designations or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, this certificate has been executed on behalf of the Company by its [Title] and by its [Title] this __ day of ________, ________.
CITIGROUP INC.
By: _______________________________________
Name:
Title:
By: _______________________________________
Name:
Title:
REGISTRAR’S COUNTERSIGNATURE
These are shares of Series Q Preferred Stock referred to in the within-mentioned Certificate of Designations.
Dated:
COMPUTERSHARE TRUST COMPANY, N.A., as Registrar
By: _______________________________________
Name:
Title:
REVERSE OF CERTIFICATE
Dividends on each share of Series Q Preferred Stock shall be payable at the rate provided in the Certificate of Designations.
The shares of Series Q Preferred Stock shall be redeemable at the option of the Company in the manner and in accordance with the terms set forth in the Certificate of Designations.
The Company shall furnish without charge to each holder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class or Series of share capital issued by the Company and the qualifications, limitations or restrictions of such preferences and/or rights.
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers the shares of Series Q Preferred Stock evidenced hereby to:
___________________________________________________
___________________________________________________
(Insert assignee’s social security or taxpayer identification number, if any)
___________________________________________________
___________________________________________________
(Insert address and zip code of assignee)
and irrevocably appoints:
___________________________________________________
___________________________________________________
as agent to transfer the shares of Series Q Preferred Stock evidenced hereby on the books of the Transfer Agent. The agent may substitute another to act for him or her.
Date:
Signature:
___________________________________________________
(Sign exactly as your name appears on the other side of this Certificate)
Signature Guarantee: ___________________________________________________
(Signature must be guaranteed by an “eligible guarantor institution” that is a bank, stockbroker, savings and loan association or credit union meeting the requirements of the Transfer Agent, which requirements include membership or participation in the Securities Transfer Agents Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Transfer Agent in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.)
CERTIFICATE OF DESIGNATIONS
OF
6.125 % FIXED RATE / FLOATING RATE NONCUMULATIVE PREFERRED STOCK SERIES R
OF
CITIGROUP INC.
______________________________
pursuant to Sections 103(f) and 151 of the
General Corporation Law of the State of Delaware
______________________________
Citigroup Inc., a Delaware corporation (the “Company”), hereby certifies that:
1. The Restated Certificate of Incorporation of the Company (as amended through the date hereof, the “Certificate of Incorporation”) fixes the total number of shares of all classes of capital stock that the Company shall have the authority to issue at six billion (6,000,000,000) shares of common stock, par value $0.01 per share, and thirty million (30,000,000) shares of preferred stock, par value $1.00 per share.
2. The Certificate of Incorporation expressly grants to the Board of Directors of the Company (the “Board of Directors”) authority to provide for the issuance of the shares of preferred stock in series, and to establish from time to time the number of shares to be included in each such series and to fix the designation, powers, preferences and rights of the shares of each such series and the qualifications, limitations or restrictions thereof.
3. Pursuant to the authority conferred upon a preferred stock committee (the “Preferred Stock Committee”) by the Board of Directors, the Preferred Stock Committee, by action duly taken on November 5, 2015, adopted resolutions (i) authorizing the issuance and sale of up to 60,000 shares of the Company’s preferred stock and (ii) approving this final form of Certificate of Designations of 6.125% Fixed Rate / Floating Rate Noncumulative Preferred Stock, Series R (the “Series R Preferred Stock”) establishing the number of shares to be included in this Series R Preferred Stock and fixing the designation, powers, preferences and rights of the shares of this Series R Preferred Stock and the qualifications, limitations or restrictions thereof as follows:
Section 1. Designation.
The designation of the Series of preferred stock shall be “6.125% Fixed Rate / Floating Rate Noncumulative Preferred Stock, Series R” (the “Series R Preferred Stock”). Each share of Series R Preferred Stock shall be identical in all respects to every other share of Series R Preferred Stock.
Section 2. Number of Shares.
The number of authorized shares of Series R Preferred Stock shall be 60,000. That number from time to time may be increased (but not in excess of the total number of authorized shares of preferred stock) or decreased (but not below the number of shares of Series R Preferred Stock then outstanding) by further resolution duly adopted by the Board of Directors, the Preferred Stock Committee or any other duly authorized committee thereof and by the filing of a certificate pursuant to the provisions of the General Corporation Law of the State of Delaware stating that such increase or reduction, as the case may be, has been so authorized. The Company shall have the authority to issue fractional shares of Series R Preferred Stock.
Section 3. Definitions. As used herein with respect to Series R Preferred Stock:
“Appropriate Federal Banking Agency” means the “appropriate federal banking agency” with respect to the Company as that term is defined in Section 3(q) of the Federal Deposit Insurance Act of 1950, as amended, or any successor provision.
“Board of Directors” has the meaning set forth in the recitals above.
“Business Day” means any weekday that is not a legal holiday in New York City and is not a day on which banking institutions in New York City are authorized or required by law or regulation to be closed.
“Calculation Agent” means the Transfer Agent acting in its capacity as calculation agent for the Series R Preferred Stock, and its successors and assigns.
“Common Stock” means the common stock of the Company, par value $0.01 per share, or any other shares of the capital stock of the Company into which such shares of common stock shall be reclassified or changed.
“Depositary” means DTC or its nominee or any successor depositary appointed by the Company.
“Dividend Payment Date” shall have the meaning set forth in Section 4(a) hereof.
“Dividend Period” shall have the meaning set forth in Section 4(a) hereof.
“Dividend Record Date” shall have the meaning set forth in Section 4(a) hereof.
“DTC” means The Depository Trust Company.
“Holder” means the Person in whose name the shares of the Series R Preferred Stock are registered, which may be treated by the Company, Calculation Agent, Transfer Agent, Registrar
and paying agent as the absolute owner of the shares of Series R Preferred Stock for the purpose of making payment and for all other purposes.
“Junior Stock” means the Common Stock and any other class or Series of stock of the
Company now existing or hereafter authorized over which Series R Preferred Stock has
preference or priority in the payment of dividends or in the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the Company.
“LIBOR Determination Date” means the second London Banking Day immediately preceding the first day of the relevant Dividend Period.
“London Banking Day” means any day on which commercial banks are open for general business (including dealings in deposits in United States dollars) in London.
“Nonpayment” shall have the meaning set forth in Section 7(b)(i) hereof.
“Officer” means the Chief Executive Officer, the Chairman, the Chief Administrative Officer, any Vice Chairman, the Chief Financial Officer, the Controller, the Chief Accounting Officer, the Treasurer, any Deputy Treasurer, any Assistant Treasurer, any Vice President, the General Counsel and Corporate Secretary and any Assistant Secretary of the Company.
“Person” means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint-stock company, limited liability company, trust, or other entity.
“Preferred Stock Director” shall have the meaning set forth in Section 7(b)(i) hereof.
“Preferred Stock Director Termination Date” shall have the meaning set forth in Section 7(b)(iv) hereof.
“Registrar” means the Transfer Agent acting in its capacity as registrar for the Series R Preferred Stock, and its successors and assigns.
“Regulatory Capital Event” means the good faith determination by the Company that, as a result of (i) any amendment to, clarification of, or change in, the laws or regulations of the United States or any political subdivision of or in the United States that is enacted or becomes effective after the initial issuance of any share of the Series R Preferred Stock, (ii) any proposed change in those laws or regulations that is announced or becomes effective after the initial issuance of any share of the Series R Preferred Stock, or (iii) any official administrative decision or judicial decision or administrative action or other official pronouncement interpreting or applying those laws or regulations or policies with respect thereto that is announced after the initial issuance of any share of the Series R Preferred Stock, there is more than an insubstantial risk that the Company will not be entitled to treat the full liquidation preference amount of $25,000 per share of the Series R Preferred Stock then outstanding as “tier 1 capital” (or its equivalent) for purposes of the capital adequacy guidelines of the Federal Reserve (or, as and if applicable, the capital adequacy guidelines or regulations of any successor Appropriate Federal Banking Agency) as then in effect and applicable, for so long as any share of the Series R Preferred Stock is outstanding.
“Reuters LIBOR01” means the display designated on the Reuters 3000 Xtra Service on page LIBOR01 Page (or such other page as may replace “Reuters LIBOR01” page on the service or such other service as may be nominated by the British Bankers’ Association or other
administrator of LIBOR for the purpose of displaying London interbank offered rates for United States dollar deposits or loans).
“Series R Preferred Stock” shall have the meaning set forth in Section 1 hereof.
“Series R Preferred Stock Certificate” shall have the meaning set forth in Section 14(a) hereof.
“Three-month LIBOR” means the rate (expressed as a percentage per annum) for deposits in United States dollars for a three-month period commencing on the first day of a Dividend Period that appears on the Reuters LIBOR01 page as of 11:00 a.m. (London time) on the LIBOR Determination Date for that Dividend Period. If such rate does not appear on the Reuters LIBOR01 page, Three-month LIBOR will be determined on the basis of the rates at which deposits in United States dollars for a three-month period commencing on the first day of that Dividend Period and in a principal amount of not less than $1 million are offered to prime banks in the London interbank market by four major banks in the London interbank market selected by the Calculation Agent (after consultation with the Company), at approximately 11:00 a.m., London time, on the LIBOR Determination Date for that Dividend Period. The Calculation Agent will request the principal London office of each of such banks to provide a quotation of its rate. If at least two such quotations are provided, Three-month LIBOR with respect to that Dividend Period will be the arithmetic mean (rounded upward if necessary to the nearest whole multiple of 0.00001%) of such quotations. If fewer than two quotations are provided, Three-month LIBOR with respect to that Dividend Period will be the arithmetic mean (rounded upward if necessary to the nearest whole multiple of 0.00001%) of the rates quoted by three major banks in New York City selected by the Calculation Agent (after consultation with the Company), at approximately 11:00 a.m., New York City time, on the LIBOR Determination Date for that Dividend Period for loans in United States dollars to leading European banks for a three-month period commencing on the first day of that Dividend Period and in a principal amount of not less than $1 million. However, if fewer than three banks selected by the Calculation Agent to provide quotations are quoting as described above, Three-month LIBOR for that Dividend Period will be the same Three-month LIBOR as determined for the previous Dividend Period or, in the case of the Dividend Period beginning on November 15, 2020, 0.3439%. The determination of Three-month LIBOR for each relevant Dividend Period by the Calculation Agent will (in the absence of manifest error) be final and binding.
“Transfer Agent” means Computershare Trust Company, N.A., a federally chartered national association, acting as Transfer Agent, Calculation Agent, Registrar and paying agent for the Series R Preferred Stock, and its successors and assigns.
“Trust” shall have the meaning set forth in Section 6(d).
Section 4. Dividends.
(a) Rate. Holders shall be entitled to receive, when, as and if declared by the Board of Directors or any duly authorized committee thereof, but only out of funds legally available therefor, noncumulative cash dividends on each share of Series R Preferred Stock in the amounts
specified below in this Section 4, and no more, payable (i) semiannually in arrears on each `May 15 and November 15 (each, a “Dividend Payment Date”), beginning May 15, 2016, from and including the date of issuance to, but excluding, November 15, 2020; provided, however, if any such day is not a Business Day, then payment of any dividend otherwise payable on that date will be made on the next succeeding day that is a Business Day, without any interest or other payment in respect of such postponement, and (ii) quarterly in arrears on each February 15, May 15, August 15 and November 15, beginning February 15, 2021, from and including November 15, 2020; provided, however, if any such day is not a Business Day, then payment of any dividend otherwise payable on that date will be made on the next succeeding day that is a Business Day, except if that day falls in the next calendar month, in which case, the payment of any dividend otherwise payable will be made on the immediately preceding Business Day, with dividends accruing to the actual payment date (each such day on which dividends are payable for any Dividend Period (as defined below) after the Dividend Period to but excluding November 15, 2020, a “Dividend Payment Date”). The period from and including the date of issuance of the Series R Preferred Stock or any Dividend Payment Date to, but excluding, the next Dividend Payment Date is a “Dividend Period.” Dividends on each share of Series R Preferred Stock will accrue on the liquidation preference of $25,000 per share at a rate per annum equal to (i) 6.125%, for each Dividend Period from and including the date of issuance to, but excluding, November 15, 2020 and (ii) Three-month LIBOR plus 4.478%, for each Dividend Period from and including November 15, 2020. The record date for payment of dividends on the Series R Preferred Stock will be the record date fixed by the Board of Directors or any other duly authorized committee thereof that is not more than 30 nor less than 10 days prior to such Dividend Payment Date (each, a “Dividend Record Date”). Any such day that is a Dividend Record Date will be a Dividend Record Date whether or not such day is a Business Day. The amount of dividends payable on or prior to November 15, 2020 will be computed on the basis of a 360-day year of twelve 30-day months. The amount of dividends payable after November 15, 2020 will be computed on the basis of a 360-day year and the actual number of days elapsed.
(b) Noncumulative Dividends. If the Board of Directors or any duly authorized committee thereof does not declare a dividend on the Series R Preferred Stock for any Dividend Period prior to the related Dividend Payment Date, that dividend will not accrue, and the Company will have no obligation to pay, and Holders shall have no right to receive, a dividend for that Dividend Period on the related Dividend Payment Date or at any future time, whether or not dividends on the Series R Preferred Stock or any other Series of preferred stock or common stock are declared for any subsequent period. References herein to the “accrual” of dividends refer only to the determination of the amount of such dividend and do not imply that any right to a dividend arises prior to the date on which a dividend is declared.
(c) Priority of Dividends. So long as any share of Series R Preferred Stock remains outstanding, unless as to a Dividend Payment Date full dividends on all outstanding shares of the Series R Preferred Stock have been declared and paid or declared and a sum sufficient for the payment of those dividends has been set aside for the Dividend Period then ending, the Company will not, and will cause its subsidiaries not to, during the next succeeding Dividend Period that commences on such Dividend Payment Date, declare or pay any dividend on, make any
distributions relating to, or redeem, purchase, acquire or make a liquidation payment relating to, any Junior Stock, or make any guarantee payment with respect thereto, other than:
(i) purchases, redemptions or other acquisitions of shares of Junior Stock in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of employees, officers, directors or consultants;
(ii) purchases of shares of Common Stock pursuant to a contractually binding requirement to buy stock existing prior to the commencement of the then-current Dividend Period, including under a contractually binding stock repurchase plan;
(iii) as a result of an exchange or conversion of any class or Series of Junior Stock for any other class or Series of Junior Stock;
(iv) the purchase of fractional interests in shares of Junior Stock pursuant to the conversion or exchange provisions of such Junior Stock or the security being converted or exchanged;
(v) the purchase of Junior Stock by an investment banking subsidiary of the Company in connection with the distribution thereof; or
(vi) the purchase of Junior Stock by any investment banking subsidiary of the Company in connection with market-making or other secondary market activities in the ordinary course of the business of such subsidiary.
The restrictions set forth in the preceding provisions of this Section 4(c) shall not apply to any Junior Stock dividends paid by the Company where the dividend is in the form of the same stock (or the right to buy the same stock) as that on which the dividend is being paid.
Except as provided below, for so long as any share of Series R Preferred Stock remains outstanding, if dividends are not declared and paid in full upon the shares of Series R Preferred Stock and any class or Series of stock of the Company now existing or hereafter authorized that ranks equally with the Series R Preferred Stock in the payment of dividends, all dividends declared upon shares of Series R Preferred Stock and such other stock will be declared on a proportional basis so that the amount of dividends declared per share will bear to each other the same ratio that accrued dividends for the then-current Dividend Period per share of Series R Preferred Stock and accrued dividends for the then-current Dividend Period per share of such other stock (including, in the case of any such other stock that bears cumulative dividends, all accrued and unpaid dividends) bear to each other.
Subject to the foregoing, and not otherwise, such dividends payable in cash, stock or otherwise, as may be determined by the Board of Directors or any duly authorized committee thereof, may be declared and paid on any other class or Series of stock of the Company from time to time out of any funds legally available for such payment, and Holders will not be entitled to participate in those dividends.
Section 5. Liquidation Rights.
(a) Liquidation. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company, Holders shall be entitled, out of funds legally available therefor, before any distribution or payment may be made by the Company or set aside for the holders of any Junior Stock and subject to the rights of the holders of any class or Series of stock ranking senior to or on parity with Series R Preferred Stock upon liquidation and the rights of the Company’s depositors and other creditors, to receive in full a liquidating distribution in the amount of the liquidation preference of $25,000 per share (the “Series R Liquidation Preference”), plus any accrued dividends thereon from the last Dividend Payment Date to, but excluding, the date of the liquidation, dissolution or winding up if and to the extent declared but not yet paid. Holders shall not be entitled to any further payments in the event of any such voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company other than what is expressly provided for in this Section 5.
(b) Partial Payment. If the assets of the Company are not sufficient to pay in full the aforesaid liquidation distributions to the Holders and any liquidation distributions owed to holders of any class or Series of stock of the Company ranking equally with the Series R Preferred Stock in the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the Company, the amounts paid to the Holders and to the holders of all such equally ranking stock shall be pro rata in accordance with the respective aggregate liquidating distributions to which they would otherwise be entitled.
(c) Merger, Consolidation and Sale of Assets Not Liquidation. For purposes of this Section 5, the sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the property and assets of the Company shall not be deemed a voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, nor shall the merger, consolidation or any other business combination transaction of the Company into or with any other corporation or Person or the merger, consolidation or any other business combination transaction of any other corporation or Person into or with the Company be deemed to be a voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company.
Section 6. Redemption.
(a) Optional Redemption. The Company, at the option of its Board of Directors or any duly authorized committee thereof, may redeem out of funds legally available therefor, (i) in whole or in part, from time to time, the shares of Series R Preferred Stock at the time outstanding, on any Dividend Payment Date on or after November 15, 2020, or (ii) in whole but not in part at any time within 90 days following a Regulatory Capital Event, in each case at a redemption price equal to $25,000 per share plus any declared and unpaid dividends, without accumulation of any undeclared dividends, to but excluding the redemption date, upon notice given as provided in Section 6(b) below.
(b) Notice of Redemption. Notice of every redemption of shares of Series R Preferred Stock shall be mailed by first class mail, postage prepaid, addressed to the Holders of such shares
to be redeemed at their respective last addresses appearing on the stock register of the Company. Such mailing shall be at least 30 days and not more than 60 days before the date fixed for redemption. Any notice mailed as provided in this Section 6(b) shall be conclusively presumed to have been duly given, whether or not the Holder receives such notice, but failure duly to give such notice by mail, or any defect in such notice or in the mailing thereof, to any Holder of shares of Series R Preferred Stock designated for redemption shall not affect the validity of the proceedings for the redemption of any other shares of Series R Preferred Stock. Each notice shall state:
(i) the redemption date;
(ii) the total number of shares of Series R Preferred Stock to be redeemed and, if fewer than all the shares of a Holder are to be redeemed, the number of such shares to be redeemed;
(iii) the redemption price;
(iv) the place or places where the certificates for such shares are to be surrendered for payment of the redemption price, if applicable; and
(v) that dividends on the shares to be redeemed will cease to accrue on the redemption date.
Notwithstanding the foregoing, if the certificates evidencing the shares of Series R Preferred Stock are held of record by a depositary and any related depository shares are held of record by a Depositary or its nominee, the Company may give such notice in any manner permitted by the Depositary.
(c) Partial Redemption. In case of any redemption of only part of the shares of Series R Preferred Stock at the time outstanding, the shares of Series R Preferred Stock to be redeemed shall be selected (i) pro rata from the Holders in proportion to the number of shares of Series R Preferred Stock held by such Holders, (ii) by lot or (iii) in such other manner as the Board of Directors or any duly authorized committee thereof may determine, in its sole discretion, to be fair and equitable; provided, however, that if for so long as the Series R Preferred Stock or depositary shares in respect thereof are listed on the New York Stock Exchange, the foregoing clause (iii) shall apply only if such method of selection is not then prohibited by any then applicable rule of the New York Stock Exchange or the New York Stock Exchange consents to or grants a waiver or exemption from such rule. Subject to the provisions of this Section 6, the Board of Directors or any duly authorized committee thereof shall have full power and authority to prescribe the terms and conditions upon which shares of Series R Preferred Stock shall be redeemed from time to time.
(d) Effectiveness of Redemption. If notice of redemption has been duly given and if on or before the redemption date specified in the notice all funds necessary for the redemption have been set aside by the Company, separate and apart from its other assets, for the pro rata benefit of the Holders of the shares called for redemption, so as to be and continue to be available therefor,
or deposited by the Company with a bank or trust company selected by the Board of Directors or any duly authorized committee thereof (the “Trust”) in trust for the pro rata benefit of the Holders of the shares called for redemption, then, notwithstanding that any certificate for any share so called for redemption has not been surrendered for cancellation, on and after the redemption date all shares so called for redemption shall cease to be outstanding, all dividends with respect to such shares shall cease to accrue on such redemption date, and all rights with respect to such shares shall forthwith on such redemption date cease and terminate, except only the right of the Holders thereof to receive the amount payable on such redemption from the Trust at any time after the redemption date from the funds so deposited, without interest. The Company shall be entitled to receive, from time to time, from the Trust any interest accrued on such funds, and the Holders of any shares called for redemption shall have no claim to any such interest. Any funds so deposited and unclaimed at the end of three years from the redemption date shall, to the extent permitted by law, be released or repaid to the Company, and in the event of such repayment to the Company, the Holders of the shares so called for redemption shall be deemed to be unsecured creditors of the Company for an amount equivalent to the amount deposited as stated above for the redemption of such shares and so repaid to the Company, but shall in no event be entitled to any interest.
Section 7. Voting Rights.
(a) General. The Holders shall not be entitled to vote on any matter except as set forth in Section 7(b) below or as required by the Delaware General Corporation Law.
(b) Special Voting Right.
(i) Voting Right. If and whenever dividends on the Series R Preferred Stock or any other class or Series of preferred stock that ranks on parity with Series R Preferred Stock as to payment of dividends and upon which voting rights equivalent to those granted by this Section 7(b)(i) have been conferred and are exercisable (any such class or series being referred to herein as “dividend parity stock”) have not been paid in an aggregate amount equal, as to any class or series, to at least three semi-annual or six quarterly Dividend Periods, as applicable, (whether consecutive or not) (a “Nonpayment”), the authorized number of directors constituting the Board of Directors shall be increased by two, and the Holders, together with holders of dividend parity stock, shall have the right, voting separately as a single class without regard to class or series (and with voting rights allocated pro rata based on the liquidation preference of each such class or series), to the exclusion of the holders of Common Stock, to elect two directors of the Company to fill such newly created directorships (and to fill any vacancies in the terms of such directorships), provided that it shall be a qualification for election of any such director that the election of such director shall not cause the Company to violate the corporate governance requirements of the New York Stock Exchange (or other exchange on which the Company’s securities may be listed) that listed companies must have a majority of independent directors and further provided that the Board of Directors shall at no time include more than two such directors. Each such director elected by the Holders together with holders of dividend parity stock is a “Preferred Stock Director.”
(ii) Election. The election of the Preferred Stock Directors will take place at any annual meeting of stockholders or any special meeting of the Holders and any dividend parity stock, called as provided herein. At any time after the special voting power has vested pursuant to Section 7(b)(i) above, the secretary of the Company may, and upon the written request (addressed to the secretary at the Company’s principal office) of the holders of at least 20% of the voting power of the Series R Preferred Stock or the holders of at least 20% of the voting power of any Series of dividend parity stock (with such voting power measured based on the voting power to elect Preferred Stock Directors), must (unless such request is received less than 90 days before the date fixed for the next annual or special meeting of the stockholders of the Company, in which event such election shall be held at such next annual or special meeting of stockholders), call a special meeting of the holders of Series R Preferred Stock and any dividend parity stock for the purposes of electing Preferred Stock Directors. The Preferred Stock Directors shall each be entitled to one vote per director on any matter.
(iii) Notice of Special Meeting. Notice for a special meeting to elect Preferred Stock Directors will be given in a similar manner to that provided in the Company’s by-laws for a special meeting of the stockholders. If the secretary of the Company does not call a special meeting within 20 days after receipt of any such request, then any Holder may (at the expense of the Company) call such meeting, upon notice as provided in this Section 7(b)(iii), and for that purpose will have access to the stock register of the Company. The Preferred Stock Directors elected at any such special meeting and each Preferred Stock Director elected at a subsequent annual or special meeting of stockholders, will be elected for term expiring upon the earlier of the Preferred Stock Director Termination Date and the next annual meeting of stockholders following such Preferred Stock Director's election. In case any vacancy in the office of a Preferred Stock Director occurs (other than prior to the initial election of the Preferred Stock Directors), the vacancy may be filled by the Preferred Stock Director remaining in office, or if none remains in office, by a plurality of the votes cast by the holders of Series R Preferred Stock and any dividend parity stock, voting together as a single class, and the Preferred Stock Director so appointed or elected to fill such vacancy shall serve for a term expiring at the next annual meeting of the stockholders. Preferred Stock Directors may only be elected by the holders of Series R Preferred Stock and dividend parity stock in accordance with this Section 7. If the holders of Series R Preferred Stock and such dividend parity stock fail to elect a sufficient number of directors to fill all directorships for which they are entitled to elect directors pursuant to this Section 7, then any directorship not so filled shall remain vacant until such time as the holders of Series R Preferred Stock and such dividend parity stock elect a person to fill such directorship in accordance with this Section 7, or such vacancy is otherwise filled in accordance with this Section 7; and no such directorship may be filled by stockholders of the Corporation other than in accordance with this Section 7.
(iv) Termination; Removal. Whenever the Company has paid noncumulative dividends in full for at least two consecutive semi-annual or four consecutive quarterly
Dividend Periods following a Nonpayment on the Series R Preferred Stock and on any dividend parity stock entitled to noncumulative dividends and has paid cumulative dividends in full on any dividend parity stock entitled to cumulative dividends, then the right of the Holders to elect the Preferred Stock Directors will cease (but subject always to the same provisions for the vesting of the special voting rights in the case of any similar non-payment of dividends in respect of future Dividend Periods) (the time of such cessation, the “Preferred Stock Director Termination Date”). Upon a Preferred Stock Director Termination Date, the terms of office of the Preferred Stock Directors will immediately terminate, the persons then serving as Preferred Stock Directors shall immediately cease to be qualified to hold office as Preferred Stock Directors, the Preferred Stock Directors shall cease to be directors of the Company and the number of directors constituting the Board of Directors shall be automatically reduced, without any action by the Board of Directors or the stockholders of the Company, by the number of Preferred Stock Directors authorized immediately prior to such termination. Any Preferred Stock Director may be removed at any time without cause by the holders of a majority of the voting power of outstanding shares of the capital stock then entitled to vote in the election of Preferred Stock Directors, voting together as a single class (with such voting power measured based on the voting power to elect Preferred Stock Directors).
(c) Senior Issuances; Adverse Changes. So long as any shares of Series R Preferred Stock are outstanding, but subject to the final paragraph of this Section 7(c), in addition to any other vote or consent of holders of the Company’s capital stock required by Delaware law, the vote or consent of the holders of at least two-thirds of the voting power of the Series R Preferred Stock and the holders of any other preferred stock entitled to vote thereon, voting together as a single class, given in person or by proxy at an annual or special meeting of stockholders, or given in writing without a meeting, will be necessary for effecting or validating any of the following actions, whether or not such approval is required by Delaware law:
(i) any amendment, alteration or repeal of any provision of the Company’s certificate of incorporation (including the certificate of designations creating the Series R Preferred Stock) or the Company’s by-laws that would alter or change the voting powers, preferences, economic rights or special rights of the Series R Preferred Stock so as to affect them adversely;
(ii) any amendment or alteration of the Company’s certificate of incorporation to authorize or create, or increase the authorized amount of, any shares of, or any securities convertible into shares of, any class or Series of the Company's capital stock ranking prior to the Series R Preferred Stock in the payment of dividends or in the distribution of assets on any liquidation, dissolution, or winding up of the Company; or
(iii) the consummation of a binding share exchange or reclassification involving the Series R Preferred Stock or a merger or consolidation of the Company with another entity, except that holders of Series R Preferred Stock will have no right to vote under this provision or otherwise under Delaware law if in each case (i) the Series R Preferred Stock remains outstanding or, in the case of any such merger or consolidation with
respect to which the Company is not the surviving or resulting entity, is converted into or exchanged for preferred securities of the surviving or resulting entity or its ultimate parent, that is an entity organized and existing under the laws of the United States of America, any state thereof or the District of Columbia and that is a corporation for U.S. federal income tax purposes (or if such entity is not a corporation, the Company having received an opinion of nationally recognized counsel experienced in such matters to the effect that Holders will be subject to tax for U.S. federal income tax purposes with respect to such new preferred securities after such merger or consolidation in the same amount, at the same time and otherwise in the same manner as would have been the case under the Series R Preferred Stock prior to such merger or consolidation), and (ii) such Series R Preferred Stock remaining outstanding or such preferred securities, as the case may be, have such rights, preferences, privileges and voting powers, taken as a whole, as are not materially less favorable to the holders thereof than the rights, preferences, privileges and voting powers of the Series R Preferred Stock, taken as a whole;
provided, however, that, for the avoidance of doubt, any increase in the amount of the authorized or issued Series R Preferred Stock or authorized preferred stock or any securities convertible into preferred stock or the creation and issuance, or an increase in the authorized or issued amount, of other Series of preferred stock or any securities convertible into preferred stock ranking equally with and/or junior to the Series R Preferred Stock with respect to the payment of dividends (whether such dividends are cumulative or noncumulative) and/or the distribution of assets upon the Company’s liquidation, dissolution or winding up will not be deemed to adversely affect the voting powers, preferences or special rights of the Series R Preferred Stock, and no stockholder will have the right to vote on such an increase, creation or issuance by reason of this Section 7.
If any amendment, alteration, repeal, share exchange, reclassification, merger or consolidation specified in this Section 7(c) would adversely affect the Series R Preferred Stock but not all Series of preferred stock of the Company, then only such Series of preferred stock as are adversely affected by and entitled to vote on the matter shall vote on the matter together with the Series R Preferred Stock as a single class (in lieu of all other Series of preferred stock) for purposes of the vote or consent required by this Section 7(c).
(d) No Vote if Redemption. No vote or consent of the Holders shall be required pursuant to Section 7(b) or 7(c) if, at or prior to the time when the act with respect to such vote or consent would otherwise be required shall be effected, the Company shall have redeemed or shall have called for redemption all outstanding shares of Series R Preferred Stock, with proper notice and sufficient funds having been set aside for such redemption, in each case pursuant to Section 6 above.
Section 8. Preemption and Conversion Rights.
The Holders shall not have any preemptive rights or conversion rights as a result of the terms hereof.
Section 9. Rank.
For the avoidance of doubt, the Board of Directors or any duly authorized committee thereof may, without the vote of the Holders, authorize and issue additional shares of Junior Stock or shares of any class or Series of stock of the Company now existing or hereafter authorized that ranks equally with the Series R Preferred Stock in the payment of dividends or in the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the Company.
Section 10. Reacquired Shares.
The Board of Directors shall take such actions as are necessary to cause the shares of Series R Preferred Stock which have been redeemed or otherwise purchased or acquired by the Company to be retired and restored to the status of authorized but unissued shares of preferred stock without designation as to series.
Section 11. No Sinking Fund.
Shares of Series R Preferred Stock are not subject to the operation of a sinking fund.
Section 12. Transfer Agent, Calculation Agent, Registrar and Paying Agent.
The duly appointed Transfer Agent, Calculation Agent, Registrar and paying agent for the Series R Preferred Stock shall be Computershare Trust Company, N.A. The Company may, in its sole discretion, remove the Transfer Agent in accordance with the agreement between the Company and the Transfer Agent; provided, however, that the Company shall appoint a successor transfer agent who shall accept such appointment prior to the effectiveness of such removal. Upon any such removal or appointment, the Company shall send notice thereof by first-class mail, postage prepaid, to the Holders.
Section 13. Replacement Certificates for Mutilated, Destroyed, Stolen and Lost Certificates.
If physical certificates are issued, the Company shall replace any mutilated certificate at the Holder’s expense upon surrender of that certificate to the Transfer Agent. The Company shall replace certificates that become destroyed, stolen or lost at the Holder’s expense upon delivery to the Company and the Transfer Agent of satisfactory evidence that the certificate has been destroyed, stolen or lost, together with any indemnity that may be required by the Transfer Agent and the Company.
Section 14. Form.
(a) Series R Preferred Stock Certificates. Series R Preferred Stock shall be issued in certificated form in substantially the form attached hereto as Exhibit A (each, a “Series R Preferred Stock Certificate”). Exhibit A is hereby incorporated in and expressly made a part of this Certificate of Designations. The Series R Preferred Stock Certificates may have notations, legends or endorsements required by law, stock exchange rules, agreements to which the Company is subject, if any, or usage (provided that any such notation, legend or endorsement is in a form acceptable to the Company).
(b) Signature. Two Officers shall sign any Series R Preferred Stock Certificate for the Company, in accordance with the Company’s by-laws and applicable law, by manual or facsimile signature. If an Officer whose signature is on a Series R Preferred Stock Certificate no longer holds that office at the time the Transfer Agent countersigned the Series R Preferred Stock Certificate, such Series R Preferred Stock Certificate shall be valid nevertheless. A Series R Preferred Stock Certificate shall not be valid until an authorized signatory of the Transfer Agent manually countersigns such Series R Preferred Stock Certificate. Each Series R Preferred Stock Certificate shall be dated the date of its countersignature.
Section 15. Taxes.
(a) Transfer Taxes. The Company shall pay any and all stock transfer, documentary, stamp and similar taxes that may be payable in respect of any issuance or delivery of shares of Series R Preferred Stock. The Company shall not, however, be required to pay any such tax that may be payable in respect of any transfer involved in the issuance or delivery of shares of Series R Preferred Stock, in a name other than that in which the shares of Series R Preferred Stock were registered, or in respect of any payment to any Person other than a payment to the registered holder thereof, and shall not be required to make any such issuance, delivery or payment unless and until the Person otherwise entitled to such issuance, delivery or payment has paid to the Company the amount of any such tax or has established, to the satisfaction of the Company, that such tax has been paid or is not payable.
(b) Withholding. All payments and distributions (or deemed distributions) on the shares of Series R Preferred Stock shall be subject to withholding and backup withholding of tax to the extent required by law, subject to applicable exemptions, and amounts withheld, if any, shall be treated as received by Holders.
Section 16. Notices.
All notices referred to herein shall be in writing, and, unless otherwise specified herein, all notices hereunder shall be deemed to have been given upon the earlier of receipt thereof or three Business Days after the mailing thereof if sent by registered or certified mail (unless first class mail shall be specifically permitted for such notice under the terms of this Certificate of Designations) with postage prepaid, addressed: (i) if to the Company, to its office at 399 Park Avenue, New York, New York 10043 (Attention: Corporate Secretary) or to the Transfer Agent at its office at 250 Royall Street, Canton, Massachusetts 02021, or other agent of the Company
designated as permitted by this Certificate of Designations, or (ii) if to any Holder, to such Holder at the address of such Holder as listed in the stock record books of the Company (which may include the records of the Transfer Agent) or (iii) to such other address as the Company or any such Holder, as the case may be, shall have designated by notice similarly given.
Section 17. Other Rights Disclaimed.
The shares of Series R Preferred Stock have no voting powers, preferences or relative, participating, optional or other special rights, or qualifications, limitations or restrictions thereof, other than as set forth herein or in the Certificate of Incorporation of the Company.
IN WITNESS WHEREOF, this Certificate of Designations has been executed on behalf of the Company by its Chief Accounting Officer this 12th day of November, 2015.
CITIGROUP INC.
By: /s/ Jeffrey R. Walsh
Name: Jeffrey R. Walsh
Title: Chief Accounting Officer
Exhibit A
FORM OF
6.125 % FIXED RATE / FLOATING RATE NONCUMULATIVE PREFERRED STOCK, SERIES R
Certificate Number_______ Number of Shares of Series R Preferred Stock______
CUSIP NO.:
CITIGROUP INC.
6.125% Fixed Rate / Floating Rate Noncumulative Preferred Stock, Series R
(par value $1.00 per share)
(liquidation preference $25,000 per share)
Citigroup Inc., a Delaware corporation (the “Company”), hereby certifies that [ ] (the “Holder”) is the registered owner of [ ] fully paid and non-assessable shares of the Company’s designated 6.125% Fixed Rate / Floating Rate Noncumulative Preferred Stock, Series R, with a par value of $1.00 per share and a liquidation preference of $25,000 per share (the “Series R Preferred Stock”). The shares of Series R Preferred Stock are transferable on the books and records of the Registrar, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer. The designations, rights, privileges, restrictions, preferences and other terms and provisions of the Series R Preferred Stock represented hereby are and shall in all respects be subject to the provisions of the Certificate of Designations dated November 12, 2015 as the same may be amended from time to time (the “Certificate of Designations”). Capitalized terms used herein but not defined shall have the meaning given them in the Certificate of Designations. The Company will provide a copy of the Certificate of Designations to a Holder without charge upon written request to the Company at its principal place of business.
Reference is hereby made to select provisions of the Series R Preferred Stock set forth on the reverse hereof, and to the Certificate of Designations, which select provisions and the Certificate of Designations shall for all purposes have the same effect as if set forth at this place.
Upon receipt of this certificate, the Holder is bound by the Certificate of Designations and is entitled to the benefits thereunder.
Unless the Registrar has properly countersigned, these shares of Series R Preferred Stock shall not be entitled to any benefit under the Certificate of Designations or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, this certificate has been executed on behalf of the Company by its [Title] and by its [Title] this __ day of ________, ________.
CITIGROUP INC.
By: _______________________________________
Name:
Title:
By: _______________________________________
Name:
Title:
REGISTRAR’S COUNTERSIGNATURE
These are shares of Series R Preferred Stock referred to in the within-mentioned Certificate of Designations.
Dated:
COMPUTERSHARE TRUST COMPANY, N.A., as Registrar
By: _______________________________________
Name:
Title:
REVERSE OF CERTIFICATE
Dividends on each share of Series R Preferred Stock shall be payable at the rate provided in the Certificate of Designations.
The shares of Series R Preferred Stock shall be redeemable at the option of the Company in the manner and in accordance with the terms set forth in the Certificate of Designations.
The Company shall furnish without charge to each holder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class or Series of share capital issued by the Company and the qualifications, limitations or restrictions of such preferences and/or rights.
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers the shares of Series R Preferred Stock evidenced hereby to:
___________________________________________________
___________________________________________________
(Insert assignee’s social security or taxpayer identification number, if any)
___________________________________________________
___________________________________________________
(Insert address and zip code of assignee)
and irrevocably appoints:
___________________________________________________
___________________________________________________
as agent to transfer the shares of Series R Preferred Stock evidenced hereby on the books of the Transfer Agent. The agent may substitute another to act for him or her.
Date:
Signature:
___________________________________________________
(Sign exactly as your name appears on the other side of this Certificate)
Signature Guarantee: ___________________________________________________
(Signature must be guaranteed by an “eligible guarantor institution” that is a bank, stockbroker, savings and loan association or credit union meeting the requirements of the Transfer Agent, which requirements include membership or participation in the Securities Transfer Agents Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Transfer Agent in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.)
CERTIFICATE OF DESIGNATIONS
OF
6.300% NONCUMULATIVE PREFERRED STOCK SERIES S
OF
CITIGROUP INC.
______________________________
pursuant to Section 151 of the
General Corporation Law of the State of Delaware
______________________________
Citigroup Inc., a Delaware corporation (the “Company”), hereby certifies that:
1. The Restated Certificate of Incorporation of the Company (as amended through the date hereof, the “Certificate of Incorporation”) fixes the total number of shares of all classes of capital stock that the Company shall have the authority to issue at six billion (6,000,000,000) shares of common stock, par value $0.01 per share, and thirty million (30,000,000) shares of preferred stock, par value $1.00 per share.
2. The Certificate of Incorporation expressly grants to the Board of Directors of the Company (the “Board of Directors”) authority to provide for the issuance of the shares of preferred stock in series, and to establish from time to time the number of shares to be included in each such series and to fix the designation, powers, preferences and rights of the shares of each such series and the qualifications, limitations or restrictions thereof.
3. Pursuant to the authority conferred upon a preferred stock committee (the “Preferred Stock Committee”) by the Board of Directors, the Preferred Stock Committee, by action duly taken on January 26, 2016, adopted resolutions (i) authorizing the issuance and sale of up to 41,400 shares of the Company’s preferred stock and (ii) approving this final form of Certificate of Designations of 6.300% Noncumulative Preferred Stock, Series S (the “Series S Preferred Stock”) establishing the number of shares to be included in this Series S Preferred Stock and fixing the designation, powers, preferences and rights of the shares of this Series S Preferred Stock and the qualifications, limitations or restrictions thereof as follows:
Section 1. Designation.
The designation of the Series of preferred stock shall be “6.300% Noncumulative Preferred Stock, Series S” (the “Series S Preferred Stock”). Each share of Series S Preferred Stock shall be identical in all respects to every other share of Series S Preferred Stock.
Section 2. Number of Shares.
The number of authorized shares of Series S Preferred Stock shall be 41,400. That number from time to time may be increased (but not in excess of the total number of authorized shares of preferred stock) or decreased (but not below the number of shares of Series S Preferred Stock then outstanding) by further resolution duly adopted by the Board of Directors, the Preferred Stock Committee or any other duly authorized committee thereof and by the filing of a certificate pursuant to the provisions of the General Corporation Law of the State of Delaware stating that such increase or reduction, as the case may be, has been so authorized. The Company shall have the authority to issue fractional shares of Series S Preferred Stock.
Section 3. Definitions. As used herein with respect to Series S Preferred Stock:
“Appropriate Federal Banking Agency” means the “appropriate federal banking agency” with respect to the Company as that term is defined in Section 3(q) of the Federal Deposit Insurance Act of 1950, as amended, or any successor provision.
“Board of Directors” has the meaning set forth in the recitals above.
“Business Day” means any weekday that is not a legal holiday in New York City and is not a day on which banking institutions in New York City are authorized or required by law or regulation to be closed.
“Calculation Agent” means the Transfer Agent acting in its capacity as calculation agent for the Series S Preferred Stock, and its successors and assigns.
“Common Stock” means the common stock of the Company, par value $0.01 per share, or any other shares of the capital stock of the Company into which such shares of common stock shall be reclassified or changed.
“Depositary” means DTC or its nominee or any successor depositary appointed by the Company.
“Dividend Payment Date” shall have the meaning set forth in Section 4(a) hereof.
“Dividend Period” shall have the meaning set forth in Section 4(a) hereof.
“Dividend Record Date” shall have the meaning set forth in Section 4(a) hereof.
“DTC” means The Depository Trust Company.
“Holder” means the Person in whose name the shares of the Series S Preferred Stock are registered, which may be treated by the Company, Calculation Agent, Transfer Agent, Registrar
and paying agent as the absolute owner of the shares of Series S Preferred Stock for the purpose of making payment and for all other purposes.
“Junior Stock” means the Common Stock and any other class or Series of stock of the
Company now existing or hereafter authorized over which Series S Preferred Stock has
preference or priority in the payment of dividends or in the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the Company.
“Nonpayment” shall have the meaning set forth in Section 7(b)(i) hereof.
“Officer” means the Chief Executive Officer, the Chairman, the Chief Administrative Officer, any Vice Chairman, the Chief Financial Officer, the Controller, the Chief Accounting Officer, the Treasurer, any Deputy Treasurer, any Assistant Treasurer, any Vice President, the General Counsel and Corporate Secretary and any Assistant Secretary of the Company.
“Person” means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint-stock company, limited liability company, trust, or other entity.
“Preferred Stock Director” shall have the meaning set forth in Section 7(b)(i) hereof.
“Preferred Stock Director Termination Date” shall have the meaning set forth in Section 7(b)(iv) hereof.
“Registrar” means the Transfer Agent acting in its capacity as registrar for the Series S Preferred Stock, and its successors and assigns.
“Regulatory Capital Event” means the good faith determination by the Company that, as a result of (i) any amendment to, clarification of, or change in, the laws or regulations of the United States or any political subdivision of or in the United States that is enacted or becomes effective after the initial issuance of any share of the Series S Preferred Stock, (ii) any proposed change in those laws or regulations that is announced or becomes effective after the initial issuance of any share of the Series S Preferred Stock, or (iii) any official administrative decision or judicial decision or administrative action or other official pronouncement interpreting or applying those laws or regulations or policies with respect thereto that is announced after the initial issuance of any share of the Series S Preferred Stock, there is more than an insubstantial risk that the Company will not be entitled to treat the full liquidation preference amount of $25,000 per share of the Series S Preferred Stock then outstanding as “tier 1 capital” (or its equivalent) for purposes of the capital adequacy guidelines of the Federal Reserve (or, as and if applicable, the capital adequacy guidelines or regulations of any successor Appropriate Federal Banking Agency) as then in effect and applicable, for so long as any share of the Series S Preferred Stock is outstanding.
“Series S Liquidation Preference” shall have the meaning set forth in Section 5(a) hereof.
“Series S Preferred Stock” shall have the meaning set forth in Section 1 hereof.
“Series S Preferred Stock Certificate” shall have the meaning set forth in Section 14(a) hereof.
“Transfer Agent” means Computershare Trust Company, N.A., a federally chartered national association, acting as Transfer Agent, Calculation Agent, Registrar and paying agent for the Series S Preferred Stock, and its successors and assigns.
“Trust” shall have the meaning set forth in Section 6(d).
Section 4. Dividends.
(a) Rate. Holders shall be entitled to receive, when, as and if declared by the Board of Directors or any duly authorized committee thereof, but only out of funds legally available therefor, noncumulative cash dividends on each share of Series S Preferred Stock in the amounts specified below in this Section 4, and no more, payable quarterly in arrears on each February 12, May 12, August 12 and November 12 (each, a “Dividend Payment Date”), beginning May 12, 2016; provided, however, if any such day is not a Business Day, then payment of any dividend otherwise payable on that date will be made on the next succeeding day that is a Business Day, without any interest or other payment in respect of such postponement (each such day on which dividends are payable for any Dividend Period (as defined below), a “Dividend Payment Date”). The period from and including the date of issuance of the Series S Preferred Stock or any Dividend Payment Date to, but excluding, the next Dividend Payment Date is a “Dividend Period.” Dividends on each share of Series S Preferred Stock will accrue on the liquidation preference of $25,000 per share at a rate per annum equal to 6.300%. The record date for payment of dividends on the Series S Preferred Stock will be the record date fixed by the Board of Directors or any other duly authorized committee thereof that is not more than 30 nor less than 10 days prior to such Dividend Payment Date (each, a “Dividend Record Date”). Any such day that is a Dividend Record Date will be a Dividend Record Date whether or not such day is a Business Day. The amount of dividends will be computed on the basis of a 360-day year of twelve 30-day months.
(b) Noncumulative Dividends. If the Board of Directors or any duly authorized committee thereof does not declare a dividend on the Series S Preferred Stock for any Dividend Period prior to the related Dividend Payment Date, that dividend will not accrue, and the Company will have no obligation to pay, and Holders shall have no right to receive, a dividend for that Dividend Period on the related Dividend Payment Date or at any future time, whether or not dividends on the Series S Preferred Stock or any other Series of preferred stock or common stock are declared for any subsequent period. References herein to the “accrual” of dividends refer only to the determination of the amount of such dividend and do not imply that any right to a dividend arises prior to the date on which a dividend is declared.
(c) Priority of Dividends. So long as any share of Series S Preferred Stock remains outstanding, unless as to a Dividend Payment Date full dividends on all outstanding shares of the Series S Preferred Stock have been declared and paid or declared and a sum sufficient for the payment of those dividends has been set aside for the Dividend Period then ending, the Company will not, and will cause its subsidiaries not to, during the next succeeding Dividend Period that commences on such Dividend Payment Date, declare or pay any dividend on, make any
distributions relating to, or redeem, purchase, acquire or make a liquidation payment relating to, any Junior Stock, or make any guarantee payment with respect thereto, other than:
(i) purchases, redemptions or other acquisitions of shares of Junior Stock in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of employees, officers, directors or consultants;
(ii) purchases of shares of Common Stock pursuant to a contractually binding requirement to buy stock existing prior to the commencement of the then-current Dividend Period, including under a contractually binding stock repurchase plan;
(iii) as a result of an exchange or conversion of any class or Series of Junior Stock for any other class or Series of Junior Stock;
(iv) the purchase of fractional interests in shares of Junior Stock pursuant to the conversion or exchange provisions of such Junior Stock or the security being converted or exchanged;
(v) the purchase of Junior Stock by an investment banking subsidiary of the Company in connection with the distribution thereof; or
(vi) the purchase of Junior Stock by any investment banking subsidiary of the Company in connection with market-making or other secondary market activities in the ordinary course of the business of such subsidiary.
The restrictions set forth in the preceding provisions of this Section 4(c) shall not apply to any Junior Stock dividends paid by the Company where the dividend is in the form of the same stock (or the right to buy the same stock) as that on which the dividend is being paid.
Except as provided below, for so long as any share of Series S Preferred Stock remains outstanding, if dividends are not declared and paid in full upon the shares of Series S Preferred Stock and any class or Series of stock of the Company now existing or hereafter authorized that ranks equally with the Series S Preferred Stock in the payment of dividends, all dividends declared upon shares of Series S Preferred Stock and such other stock will be declared on a proportional basis so that the amount of dividends declared per share will bear to each other the same ratio that accrued dividends for the then-current Dividend Period per share of Series S Preferred Stock and accrued dividends for the then-current Dividend Period per share of such other stock (including, in the case of any such other stock that bears cumulative dividends, all accrued and unpaid dividends) bear to each other.
Subject to the foregoing, and not otherwise, such dividends payable in cash, stock or otherwise, as may be determined by the Board of Directors or any duly authorized committee thereof, may be declared and paid on any other class or Series of stock of the Company from time to time out of any funds legally available for such payment, and Holders will not be entitled to participate in those dividends.
Section 5. Liquidation Rights.
(a) Liquidation. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company, Holders shall be entitled, out of funds legally available therefor, before any distribution or payment may be made by the Company or set aside for the holders of any Junior Stock and subject to the rights of the holders of any class or Series of stock ranking senior to or on parity with Series S Preferred Stock upon liquidation and the rights of the Company’s depositors and other creditors, to receive in full a liquidating distribution in the amount of the liquidation preference of $25,000 per share (the “Series S Liquidation Preference”), plus any accrued dividends thereon from the last Dividend Payment Date to, but excluding, the date of the liquidation, dissolution or winding up if and to the extent declared but not yet paid. Holders shall not be entitled to any further payments in the event of any such voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company other than what is expressly provided for in this Section 5.
(b) Partial Payment. If the assets of the Company are not sufficient to pay in full the aforesaid liquidation distributions to the Holders and any liquidation distributions owed to holders of any class or Series of stock of the Company ranking equally with the Series S Preferred Stock in the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the Company, the amounts paid to the Holders and to the holders of all such equally ranking stock shall be pro rata in accordance with the respective aggregate liquidating distributions to which they would otherwise be entitled.
(c) Merger, Consolidation and Sale of Assets Not Liquidation. For purposes of this Section 5, the sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the property and assets of the Company shall not be deemed a voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, nor shall the merger, consolidation or any other business combination transaction of the Company into or with any other corporation or Person or the merger, consolidation or any other business combination transaction of any other corporation or Person into or with the Company be deemed to be a voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company.
Section 6. Redemption.
(a) Optional Redemption. The Company, at the option of its Board of Directors or any duly authorized committee thereof, may redeem out of funds legally available therefor, (i) in whole or in part, from time to time, the shares of Series S Preferred Stock at the time outstanding, on any Dividend Payment Date on or after February 12, 2021, or (ii) in whole but not in part at any time within 90 days following a Regulatory Capital Event, in each case at a redemption price equal to $25,000 per share plus any declared and unpaid dividends, without accumulation of any undeclared dividends, to, but excluding, the redemption date, upon notice given as provided in Section 6(b) below.
(b) Notice of Redemption. Notice of every redemption of shares of Series S Preferred Stock shall be mailed by first class mail, postage prepaid, addressed to the Holders of such shares
to be redeemed at their respective last addresses appearing on the stock register of the Company. Such mailing shall be at least 30 days and not more than 60 days before the date fixed for redemption. Any notice mailed as provided in this Section 6(b) shall be conclusively presumed to have been duly given, whether or not the Holder receives such notice, but failure duly to give such notice by mail, or any defect in such notice or in the mailing thereof, to any Holder of shares of Series S Preferred Stock designated for redemption shall not affect the validity of the proceedings for the redemption of any other shares of Series S Preferred Stock. Each notice shall state:
(i) the redemption date;
(ii) the total number of shares of Series S Preferred Stock to be redeemed and, if fewer than all the shares of a Holder are to be redeemed, the number of such shares to be redeemed;
(iii) the redemption price;
(iv) the place or places where the certificates for such shares are to be surrendered for payment of the redemption price, if applicable; and
(v) that dividends on the shares to be redeemed will cease to accrue on the redemption date.
Notwithstanding the foregoing, if the certificates evidencing the shares of Series S Preferred Stock are held of record by a depositary and any related depository shares are held of record by a Depositary or its nominee, the Company may give such notice in any manner permitted by the Depositary.
(c) Partial Redemption. In case of any redemption of only part of the shares of Series S Preferred Stock at the time outstanding, the shares of Series S Preferred Stock to be redeemed shall be selected (i) pro rata from the Holders in proportion to the number of shares of Series S Preferred Stock held by such Holders, (ii) by lot or (iii) in such other manner as the Board of Directors or any duly authorized committee thereof may determine, in its sole discretion, to be fair and equitable; provided, however, that if for so long as the Series S Preferred Stock or depositary shares in respect thereof are listed on the New York Stock Exchange, the foregoing clause (iii) shall apply only if such method of selection is not then prohibited by any then applicable rule of the New York Stock Exchange or the New York Stock Exchange consents to or grants a waiver or exemption from such rule. Subject to the provisions of this Section 6, the Board of Directors or any duly authorized committee thereof shall have full power and authority to prescribe the terms and conditions upon which shares of Series S Preferred Stock shall be redeemed from time to time.
(d) Effectiveness of Redemption. If notice of redemption has been duly given and if on or before the redemption date specified in the notice all funds necessary for the redemption have been set aside by the Company, separate and apart from its other assets, for the pro rata benefit of the Holders of the shares called for redemption, so as to be and continue to be available therefor,
or deposited by the Company with a bank or trust company selected by the Board of Directors or any duly authorized committee thereof (the “Trust”) in trust for the pro rata benefit of the Holders of the shares called for redemption, then, notwithstanding that any certificate for any share so called for redemption has not been surrendered for cancellation, on and after the redemption date all shares so called for redemption shall cease to be outstanding, all dividends with respect to such shares shall cease to accrue on such redemption date, and all rights with respect to such shares shall forthwith on such redemption date cease and terminate, except only the right of the Holders thereof to receive the amount payable on such redemption from the Trust at any time after the redemption date from the funds so deposited, without interest. The Company shall be entitled to receive, from time to time, from the Trust any interest accrued on such funds, and the Holders of any shares called for redemption shall have no claim to any such interest. Any funds so deposited and unclaimed at the end of three years from the redemption date shall, to the extent permitted by law, be released or repaid to the Company, and in the event of such repayment to the Company, the Holders of the shares so called for redemption shall be deemed to be unsecured creditors of the Company for an amount equivalent to the amount deposited as stated above for the redemption of such shares and so repaid to the Company, but shall in no event be entitled to any interest.
Section 7. Voting Rights.
(a) General. The Holders shall not be entitled to vote on any matter except as set forth in Section 7(b) below or as required by the Delaware General Corporation Law.
(b) Special Voting Right.
(i) Voting Right. If and whenever dividends on the Series S Preferred Stock or any other class or Series of preferred stock that ranks on parity with Series S Preferred Stock as to payment of dividends and upon which voting rights equivalent to those granted by this Section 7(b)(i) have been conferred and are exercisable (any such class or series being referred to herein as “dividend parity stock”) have not been paid in an aggregate amount equal, as to any class or series, to at least three semi-annual or six quarterly Dividend Periods, as applicable, (whether consecutive or not) (a “Nonpayment”), the authorized number of directors constituting the Board of Directors shall be increased by two, and the Holders, together with holders of dividend parity stock, shall have the right, voting separately as a single class without regard to class or series (and with voting rights allocated pro rata based on the liquidation preference of each such class or series), to the exclusion of the holders of Common Stock, to elect two directors of the Company to fill such newly created directorships (and to fill any vacancies in the terms of such directorships), provided that it shall be a qualification for election of any such director that the election of such director shall not cause the Company to violate the corporate governance requirements of the New York Stock Exchange (or other exchange on which the Company’s securities may be listed) that listed companies must have a majority of independent directors and further provided that the Board of Directors shall at no time include more than two such directors. Each such director elected by the Holders together with holders of dividend parity stock is a “Preferred Stock Director.”
(ii) Election. The election of the Preferred Stock Directors will take place at any annual meeting of stockholders or any special meeting of the Holders and any dividend parity stock, called as provided herein. At any time after the special voting power has vested pursuant to Section 7(b)(i) above, the secretary of the Company may, and upon the written request (addressed to the secretary at the Company’s principal office) of the holders of at least 20% of the voting power of the Series S Preferred Stock or the holders of at least 20% of the voting power of any Series of dividend parity stock (with such voting power measured based on the voting power to elect Preferred Stock Directors), must (unless such request is received less than 90 days before the date fixed for the next annual or special meeting of the stockholders of the Company, in which event such election shall be held at such next annual or special meeting of stockholders), call a special meeting of the holders of Series S Preferred Stock and any dividend parity stock for the purposes of electing Preferred Stock Directors. The Preferred Stock Directors shall each be entitled to one vote per director on any matter.
(iii) Notice of Special Meeting. Notice for a special meeting to elect Preferred Stock Directors will be given in a similar manner to that provided in the Company’s by-laws for a special meeting of the stockholders. If the secretary of the Company does not call a special meeting within 20 days after receipt of any such request, then any Holder may (at the expense of the Company) call such meeting, upon notice as provided in this Section 7(b)(iii), and for that purpose will have access to the stock register of the Company. The Preferred Stock Directors elected at any such special meeting and each Preferred Stock Director elected at a subsequent annual or special meeting of stockholders, will be elected for term expiring upon the earlier of the Preferred Stock Director Termination Date and the next annual meeting of stockholders following such Preferred Stock Director's election. In case any vacancy in the office of a Preferred Stock Director occurs (other than prior to the initial election of the Preferred Stock Directors), the vacancy may be filled by the Preferred Stock Director remaining in office, or if none remains in office, by a plurality of the votes cast by the holders of Series S Preferred Stock and any dividend parity stock, voting together as a single class, and the Preferred Stock Director so appointed or elected to fill such vacancy shall serve for a term expiring at the next annual meeting of the stockholders. Preferred Stock Directors may only be elected by the holders of Series S Preferred Stock and dividend parity stock in accordance with this Section 7. If the holders of Series S Preferred Stock and such dividend parity stock fail to elect a sufficient number of directors to fill all directorships for which they are entitled to elect directors pursuant to this Section 7, then any directorship not so filled shall remain vacant until such time as the holders of Series S Preferred Stock and such dividend parity stock elect a person to fill such directorship in accordance with this Section 7, or such vacancy is otherwise filled in accordance with this Section 7; and no such directorship may be filled by stockholders of the Corporation other than in accordance with this Section 7.
(iv) Termination; Removal. Whenever the Company has paid noncumulative dividends in full for at least two consecutive semi-annual or four consecutive quarterly
Dividend Periods following a Nonpayment on the Series S Preferred Stock and on any dividend parity stock entitled to noncumulative dividends and has paid cumulative dividends in full on any dividend parity stock entitled to cumulative dividends, then the right of the Holders to elect the Preferred Stock Directors will cease (but subject always to the same provisions for the vesting of the special voting rights in the case of any similar non-payment of dividends in respect of future Dividend Periods) (the time of such cessation, the “Preferred Stock Director Termination Date”). Upon a Preferred Stock Director Termination Date, the terms of office of the Preferred Stock Directors will immediately terminate, the persons then serving as Preferred Stock Directors shall immediately cease to be qualified to hold office as Preferred Stock Directors, the Preferred Stock Directors shall cease to be directors of the Company and the number of directors constituting the Board of Directors shall be automatically reduced, without any action by the Board of Directors or the stockholders of the Company, by the number of Preferred Stock Directors authorized immediately prior to such termination. Any Preferred Stock Director may be removed at any time without cause by the holders of a majority of the voting power of outstanding shares of the capital stock then entitled to vote in the election of Preferred Stock Directors, voting together as a single class (with such voting power measured based on the voting power to elect Preferred Stock Directors).
(c) Senior Issuances; Adverse Changes. So long as any shares of Series S Preferred Stock are outstanding, but subject to the final paragraph of this Section 7(c), in addition to any other vote or consent of holders of the Company’s capital stock required by Delaware law, the vote or consent of the holders of at least two-thirds of the voting power of the Series S Preferred Stock and the holders of any other preferred stock entitled to vote thereon, voting together as a single class, given in person or by proxy at an annual or special meeting of stockholders, or given in writing without a meeting, will be necessary for effecting or validating any of the following actions, whether or not such approval is required by Delaware law:
(i) any amendment, alteration or repeal of any provision of the Company’s certificate of incorporation (including the certificate of designations creating the Series S Preferred Stock) or the Company’s by-laws that would alter or change the voting powers, preferences, economic rights or special rights of the Series S Preferred Stock so as to affect them adversely;
(ii) any amendment or alteration of the Company’s certificate of incorporation to authorize or create, or increase the authorized amount of, any shares of, or any securities convertible into shares of, any class or Series of the Company's capital stock ranking prior to the Series S Preferred Stock in the payment of dividends or in the distribution of assets on any liquidation, dissolution, or winding up of the Company; or
(iii) the consummation of a binding share exchange or reclassification involving the Series S Preferred Stock or a merger or consolidation of the Company with another entity, except that holders of Series S Preferred Stock will have no right to vote under this provision or otherwise under Delaware law if in each case (i) the Series S Preferred Stock remains outstanding or, in the case of any such merger or consolidation with respect to
which the Company is not the surviving or resulting entity, is converted into or exchanged for preferred securities of the surviving or resulting entity or its ultimate parent, that is an entity organized and existing under the laws of the United States of America, any state thereof or the District of Columbia and that is a corporation for U.S. federal income tax purposes (or if such entity is not a corporation, the Company having received an opinion of nationally recognized counsel experienced in such matters to the effect that Holders will be subject to tax for U.S. federal income tax purposes with respect to such new preferred securities after such merger or consolidation in the same amount, at the same time and otherwise in the same manner as would have been the case under the Series S Preferred Stock prior to such merger or consolidation), and (ii) such Series S Preferred Stock remaining outstanding or such preferred securities, as the case may be, have such rights, preferences, privileges and voting powers, taken as a whole, as are not materially less favorable to the holders thereof than the rights, preferences, privileges and voting powers of the Series S Preferred Stock, taken as a whole;
provided, however, that, for the avoidance of doubt, any increase in the amount of the authorized or issued Series S Preferred Stock or authorized preferred stock or any securities convertible into preferred stock or the creation and issuance, or an increase in the authorized or issued amount, of other Series of preferred stock or any securities convertible into preferred stock ranking equally with and/or junior to the Series S Preferred Stock with respect to the payment of dividends (whether such dividends are cumulative or noncumulative) and/or the distribution of assets upon the Company’s liquidation, dissolution or winding up will not be deemed to adversely affect the voting powers, preferences or special rights of the Series S Preferred Stock, and no stockholder will have the right to vote on such an increase, creation or issuance by reason of this Section 7.
If any amendment, alteration, repeal, share exchange, reclassification, merger or consolidation specified in this Section 7(c) would adversely affect the Series S Preferred Stock but not all Series of preferred stock of the Company, then only such Series of preferred stock as are adversely affected by and entitled to vote on the matter shall vote on the matter together with the Series S Preferred Stock as a single class (in lieu of all other Series of preferred stock) for purposes of the vote or consent required by this Section 7(c).
(d) No Vote if Redemption. No vote or consent of the Holders shall be required pursuant to Section 7(b) or 7(c) if, at or prior to the time when the act with respect to such vote or consent would otherwise be required shall be effected, the Company shall have redeemed or shall have called for redemption all outstanding shares of Series S Preferred Stock, with proper notice and sufficient funds having been set aside for such redemption, in each case pursuant to Section 6 above.
Section 8. Preemption and Conversion Rights.
The Holders shall not have any preemptive rights or conversion rights as a result of the terms hereof.
Section 9. Rank.
For the avoidance of doubt, the Board of Directors or any duly authorized committee thereof may, without the vote of the Holders, authorize and issue additional shares of Junior Stock or shares of any class or Series of stock of the Company now existing or hereafter authorized that ranks equally with the Series S Preferred Stock in the payment of dividends or in the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the Company.
Section 10. Reacquired Shares.
The Board of Directors shall take such actions as are necessary to cause the shares of Series S Preferred Stock which have been redeemed or otherwise purchased or acquired by the Company to be retired and restored to the status of authorized but unissued shares of preferred stock without designation as to series.
Section 11. No Sinking Fund.
Shares of Series S Preferred Stock are not subject to the operation of a sinking fund.
Section 12. Transfer Agent, Calculation Agent, Registrar and Paying Agent.
The duly appointed Transfer Agent, Calculation Agent, Registrar and paying agent for the Series S Preferred Stock shall be Computershare Trust Company, N.A. The Company may, in its sole discretion, remove the Transfer Agent in accordance with the agreement between the Company and the Transfer Agent; provided, however, that the Company shall appoint a successor transfer agent who shall accept such appointment prior to the effectiveness of such removal. Upon any such removal or appointment, the Company shall send notice thereof by first-class mail, postage prepaid, to the Holders.
Section 13. Replacement Certificates for Mutilated, Destroyed, Stolen and Lost Certificates.
If physical certificates are issued, the Company shall replace any mutilated certificate at the Holder’s expense upon surrender of that certificate to the Transfer Agent. The Company shall replace certificates that become destroyed, stolen or lost at the Holder’s expense upon delivery to the Company and the Transfer Agent of satisfactory evidence that the certificate has been destroyed, stolen or lost, together with any indemnity that may be required by the Transfer Agent and the Company.
Section 14. Form.
(a) Series S Preferred Stock Certificates. Series S Preferred Stock shall be issued in certificated form in substantially the form attached hereto as Exhibit A (each, a “Series S Preferred Stock Certificate”). Exhibit A is hereby incorporated in and expressly made a part of this Certificate of Designations. The Series S Preferred Stock Certificates may have notations, legends or endorsements required by law, stock exchange rules, agreements to which the Company is subject, if any, or usage (provided that any such notation, legend or endorsement is in a form acceptable to the Company).
(b) Signature. Two Officers shall sign any Series S Preferred Stock Certificate for the Company, in accordance with the Company’s by-laws and applicable law, by manual or facsimile signature. If an Officer whose signature is on a Series S Preferred Stock Certificate no longer holds that office at the time the Transfer Agent countersigned the Series S Preferred Stock Certificate, such Series S Preferred Stock Certificate shall be valid nevertheless. A Series S Preferred Stock Certificate shall not be valid until an authorized signatory of the Transfer Agent manually countersigns such Series S Preferred Stock Certificate. Each Series S Preferred Stock Certificate shall be dated the date of its countersignature.
Section 15. Taxes.
(a) Transfer Taxes. The Company shall pay any and all stock transfer, documentary, stamp and similar taxes that may be payable in respect of any issuance or delivery of shares of Series S Preferred Stock. The Company shall not, however, be required to pay any such tax that may be payable in respect of any transfer involved in the issuance or delivery of shares of Series S Preferred Stock, in a name other than that in which the shares of Series S Preferred Stock were registered, or in respect of any payment to any Person other than a payment to the registered holder thereof, and shall not be required to make any such issuance, delivery or payment unless and until the Person otherwise entitled to such issuance, delivery or payment has paid to the Company the amount of any such tax or has established, to the satisfaction of the Company, that such tax has been paid or is not payable.
(b) Withholding. All payments and distributions (or deemed distributions) on the shares of Series S Preferred Stock shall be subject to withholding and backup withholding of tax to the extent required by law, subject to applicable exemptions, and amounts withheld, if any, shall be treated as received by Holders.
Section 16. Notices.
All notices referred to herein shall be in writing, and, unless otherwise specified herein, all notices hereunder shall be deemed to have been given upon the earlier of receipt thereof or three Business Days after the mailing thereof if sent by registered or certified mail (unless first class mail shall be specifically permitted for such notice under the terms of this Certificate of Designations) with postage prepaid, addressed: (i) if to the Company, to its office at 399 Park Avenue, New York, New York 10043 (Attention: Corporate Secretary) or to the Transfer Agent at its office at 250 Royall Street, Canton, Massachusetts 02021, or other agent of the Company
designated as permitted by this Certificate of Designations, or (ii) if to any Holder, to such Holder at the address of such Holder as listed in the stock record books of the Company (which may include the records of the Transfer Agent) or (iii) to such other address as the Company or any such Holder, as the case may be, shall have designated by notice similarly given.
Section 17. Other Rights Disclaimed.
The shares of Series S Preferred Stock have no voting powers, preferences or relative, participating, optional or other special rights, or qualifications, limitations or restrictions thereof, other than as set forth herein or in the Certificate of Incorporation of the Company.
IN WITNESS WHEREOF, this Certificate of Designations has been executed on behalf of the Company by its Chief Accounting Officer this 1st day of February, 2016.
CITIGROUP INC.
By: /s/ Jeffrey R. Walsh
Name: Jeffrey R. Walsh
Title: Chief Accounting Officer
Exhibit A
FORM OF
6.300% NONCUMULATIVE PREFERRED STOCK, SERIES S
Certificate Number_______ Number of Shares of Series S Preferred Stock______
CUSIP NO.:
CITIGROUP INC.
6.300% Noncumulative Preferred Stock, Series S
(par value $1.00 per share)
(liquidation preference $25,000 per share)
Citigroup Inc., a Delaware corporation (the “Company”), hereby certifies that [ ] (the “Holder”) is the registered owner of [ ] fully paid and non-assessable shares of the Company’s designated 6.300% Noncumulative Preferred Stock, Series S, with a par value of $1.00 per share and a liquidation preference of $25,000 per share (the “Series S Preferred Stock”). The shares of Series S Preferred Stock are transferable on the books and records of the Registrar, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer. The designations, rights, privileges, restrictions, preferences and other terms and provisions of the Series S Preferred Stock represented hereby are and shall in all respects be subject to the provisions of the Certificate of Designations dated February 1, 2016 as the same may be amended from time to time (the “Certificate of Designations”). Capitalized terms used herein but not defined shall have the meaning given them in the Certificate of Designations. The Company will provide a copy of the Certificate of Designations to a Holder without charge upon written request to the Company at its principal place of business.
Reference is hereby made to select provisions of the Series S Preferred Stock set forth on the reverse hereof, and to the Certificate of Designations, which select provisions and the Certificate of Designations shall for all purposes have the same effect as if set forth at this place.
Upon receipt of this certificate, the Holder is bound by the Certificate of Designations and is entitled to the benefits thereunder.
Unless the Registrar has properly countersigned, these shares of Series S Preferred Stock shall not be entitled to any benefit under the Certificate of Designations or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, this certificate has been executed on behalf of the Company by its [Title] and by its [Title] this __ day of ________, ________.
CITIGROUP INC.
By: _______________________________________
Name:
Title:
By: _______________________________________
Name:
Title:
REGISTRAR’S COUNTERSIGNATURE
These are shares of Series S Preferred Stock referred to in the within-mentioned Certificate of Designations.
Dated:
COMPUTERSHARE TRUST COMPANY, N.A., as Registrar
By: _______________________________________
Name:
Title:
REVERSE OF CERTIFICATE
Dividends on each share of Series S Preferred Stock shall be payable at the rate provided in the Certificate of Designations.
The shares of Series S Preferred Stock shall be redeemable at the option of the Company in the manner and in accordance with the terms set forth in the Certificate of Designations.
The Company shall furnish without charge to each holder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class or Series of share capital issued by the Company and the qualifications, limitations or restrictions of such preferences and/or rights.
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers the shares of Series S Preferred Stock evidenced hereby to:
___________________________________________________
___________________________________________________
(Insert assignee’s social security or taxpayer identification number, if any)
___________________________________________________
___________________________________________________
(Insert address and zip code of assignee)
and irrevocably appoints:
___________________________________________________
___________________________________________________
as agent to transfer the shares of Series S Preferred Stock evidenced hereby on the books of the Transfer Agent. The agent may substitute another to act for him or her.
Date:
Signature:
___________________________________________________
(Sign exactly as your name appears on the other side of this Certificate)
Signature Guarantee: ___________________________________________________
(Signature must be guaranteed by an “eligible guarantor institution” that is a bank, stockbroker, savings and loan association or credit union meeting the requirements of the Transfer Agent, which requirements include membership or participation in the Securities Transfer Agents Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Transfer Agent in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.)
CERTIFICATE OF DESIGNATIONS
OF
6.250% FIXED RATE / FLOATING RATE NONCUMULATIVE PREFERRED STOCK SERIES T
OF
CITIGROUP INC.
______________________________
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
______________________________
Citigroup Inc., a Delaware corporation (the “Company”), hereby certifies that:
1. The Restated Certificate of Incorporation of the Company (as amended through the date hereof, the “Certificate of Incorporation”) fixes the total number of shares of all classes of capital stock that the Company shall have the authority to issue at six billion (6,000,000,000) shares of common stock, par value $0.01 per share, and thirty million (30,000,000) shares of preferred stock, par value $1.00 per share.
2. The Certificate of Incorporation expressly grants to the Board of Directors of the Company (the “Board of Directors”) authority to provide for the issuance of the shares of preferred stock in series, and to establish from time to time the number of shares to be included in each such series and to fix the designation, powers, preferences and rights of the shares of each such series and the qualifications, limitations or restrictions thereof.
3. Pursuant to the authority conferred upon a preferred stock committee (the “Preferred Stock Committee”) by the Board of Directors, the Preferred Stock Committee, by action duly taken on April 18, 2016, adopted resolutions (i) authorizing the issuance and sale of up to 60,000 shares of the Company’s preferred stock and (ii) approving this final form of Certificate of Designations of 6.250% Fixed Rate / Floating Rate Noncumulative Preferred Stock, Series T (the “Series T Preferred Stock”) establishing the number of shares to be included in this Series T Preferred Stock and fixing the designation, powers, preferences and rights of the shares of this Series T Preferred Stock and the qualifications, limitations or restrictions thereof as follows:
Section 1. Designation.
The designation of the Series of preferred stock shall be “6.250% Fixed Rate / Floating Rate Noncumulative Preferred Stock, Series T” (the “Series T Preferred Stock”). Each share of Series T Preferred Stock shall be identical in all respects to every other share of Series T Preferred Stock.
Section 2. Number of Shares.
The number of authorized shares of Series T Preferred Stock shall be 60,000. That number from time to time may be increased (but not in excess of the total number of authorized shares of preferred stock) or decreased (but not below the number of shares of Series T Preferred Stock then outstanding) by further resolution duly adopted by the Board of Directors, the Preferred Stock Committee or any other duly authorized committee thereof and by the filing of a certificate pursuant to the provisions of the General Corporation Law of the State of Delaware stating that such increase or reduction, as the case may be, has been so authorized. The Company shall have the authority to issue fractional shares of Series T Preferred Stock.
Section 3. Definitions. As used herein with respect to Series T Preferred Stock:
“Appropriate Federal Banking Agency” means the “appropriate federal banking agency” with respect to the Company as that term is defined in Section 3(q) of the Federal Deposit Insurance Act of 1950, as amended, or any successor provision.
“Board of Directors” has the meaning set forth in the recitals above.
“Business Day” means any weekday that is not a legal holiday in New York City and is not a day on which banking institutions in New York City are authorized or required by law or regulation to be closed.
“Calculation Agent” means the Transfer Agent acting in its capacity as calculation agent for the Series T Preferred Stock, and its successors and assigns.
“Common Stock” means the common stock of the Company, par value $0.01 per share, or any other shares of the capital stock of the Company into which such shares of common stock shall be reclassified or changed.
“Depositary” means DTC or its nominee or any successor depositary appointed by the Company.
“Dividend Payment Date” shall have the meaning set forth in Section 4(a) hereof.
“Dividend Period” shall have the meaning set forth in Section 4(a) hereof.
“Dividend Record Date” shall have the meaning set forth in Section 4(a) hereof.
“DTC” means The Depository Trust Company.
“Holder” means the Person in whose name the shares of the Series T Preferred Stock are registered, which may be treated by the Company, Calculation Agent, Transfer Agent, Registrar
and paying agent as the absolute owner of the shares of Series T Preferred Stock for the purpose of making payment and for all other purposes.
“Junior Stock” means the Common Stock and any other class or Series of stock of the
Company now existing or hereafter authorized over which Series T Preferred Stock has
preference or priority in the payment of dividends or in the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the Company.
“LIBOR Determination Date” means the second London Banking Day immediately preceding the first day of the relevant Dividend Period.
“London Banking Day” means any day on which commercial banks are open for general business (including dealings in deposits in United States dollars) in London.
“Nonpayment” shall have the meaning set forth in Section 7(b)(i) hereof.
“Officer” means the Chief Executive Officer, the Chairman, the Chief Administrative Officer, any Vice Chairman, the Chief Financial Officer, the Controller, the Chief Accounting Officer, the Treasurer, any Deputy Treasurer, any Assistant Treasurer, any Vice President, the General Counsel and Corporate Secretary and any Assistant Secretary of the Company.
“Person” means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint-stock company, limited liability company, trust, or other entity.
“Preferred Stock Director” shall have the meaning set forth in Section 7(b)(i) hereof.
“Preferred Stock Director Termination Date” shall have the meaning set forth in Section 7(b)(iv) hereof.
“Registrar” means the Transfer Agent acting in its capacity as registrar for the Series T Preferred Stock, and its successors and assigns.
“Regulatory Capital Event” means the good faith determination by the Company that, as a result of (i) any amendment to, clarification of, or change in, the laws or regulations of the United States or any political subdivision of or in the United States that is enacted or becomes effective after the initial issuance of any share of the Series T Preferred Stock, (ii) any proposed change in those laws or regulations that is announced or becomes effective after the initial issuance of any share of the Series T Preferred Stock, or (iii) any official administrative decision or judicial decision or administrative action or other official pronouncement interpreting or applying those laws or regulations or policies with respect thereto that is announced after the initial issuance of any share of the Series T Preferred Stock, there is more than an insubstantial risk that the Company will not be entitled to treat the full liquidation preference amount of $25,000 per share of the Series T Preferred Stock then outstanding as “tier 1 capital” (or its equivalent) for purposes of the capital adequacy guidelines of the Federal Reserve (or, as and if applicable, the capital adequacy guidelines or regulations of any successor Appropriate Federal Banking Agency) as then in effect and applicable, for so long as any share of the Series T Preferred Stock is outstanding.
“Reuters LIBOR01” means the display designated on the Reuters 3000 Xtra Service on page LIBOR01 Page (or such other page as may replace “Reuters LIBOR01” page on the service or such other service as may be nominated by the British Bankers’ Association or other
administrator of LIBOR for the purpose of displaying London interbank offered rates for United States dollar deposits or loans).
“Series T Liquidation Preference” shall have the meaning set forth in Section 5(a) hereof.
“Series T Preferred Stock” shall have the meaning set forth in Section 1 hereof.
“Series T Preferred Stock Certificate” shall have the meaning set forth in Section 14(a) hereof.
“Three-month LIBOR” means the rate (expressed as a percentage per annum) for deposits in United States dollars for a three-month period commencing on the first day of a Dividend Period that appears on the Reuters LIBOR01 page as of 11:00 a.m. (London time) on the LIBOR Determination Date for that Dividend Period. If such rate does not appear on the Reuters LIBOR01 page, Three-month LIBOR will be determined on the basis of the rates at which deposits in United States dollars for a three-month period commencing on the first day of that Dividend Period and in a principal amount of not less than $1 million are offered to prime banks in the London interbank market by four major banks in the London interbank market selected by the Calculation Agent (after consultation with the Company), at approximately 11:00 a.m., London time, on the LIBOR Determination Date for that Dividend Period. The Calculation Agent will request the principal London office of each of such banks to provide a quotation of its rate. If at least two such quotations are provided, Three-month LIBOR with respect to that Dividend Period will be the arithmetic mean (rounded upward if necessary to the nearest whole multiple of 0.00001%) of such quotations. If fewer than two quotations are provided, Three-month LIBOR with respect to that Dividend Period will be the arithmetic mean (rounded upward if necessary to the nearest whole multiple of 0.00001%) of the rates quoted by three major banks in New York City selected by the Calculation Agent (after consultation with the Company), at approximately 11:00 a.m., New York City time, on the LIBOR Determination Date for that Dividend Period for loans in United States dollars to leading European banks for a three-month period commencing on the first day of that Dividend Period and in a principal amount of not less than $1 million. However, if fewer than three banks selected by the Calculation Agent to provide quotations are quoting as described above, Three-month LIBOR for that Dividend Period will be the same Three-month LIBOR as determined for the previous Dividend Period or, in the case of the Dividend Period beginning on February 15, 2026, 0.6344%. The determination of Three-month LIBOR for each relevant Dividend Period by the Calculation Agent will (in the absence of manifest error) be final and binding.
“Transfer Agent” means Computershare Trust Company, N.A., a federally chartered national association, acting as Transfer Agent, Calculation Agent, Registrar and paying agent for the Series T Preferred Stock, and its successors and assigns.
“Trust” shall have the meaning set forth in Section 6(d).
Section 4. Dividends.
(a) Rate. Holders shall be entitled to receive, when, as and if declared by the Board of Directors or any duly authorized committee thereof, but only out of funds legally available therefor, noncumulative cash dividends on each share of Series T Preferred Stock in the amounts specified below in this Section 4, and no more, payable (i) semiannually in arrears on each February 15 and August 15 (each, a “Dividend Payment Date”), beginning February 15, 2017, from and including the date of issuance to, but excluding, August 15, 2026; provided, however, if any such day is not a Business Day, then payment of any dividend otherwise payable on that date will be made on the next succeeding day that is a Business Day, without any interest or other payment in respect of such postponement, and (ii) quarterly in arrears on each February 15, May 15, August 15 and November 15, beginning November 15, 2026, from and including August 15, 2026; provided, however, if any such day is not a Business Day, then payment of any dividend otherwise payable on that date will be made on the next succeeding day that is a Business Day, except if that day falls in the next calendar month, in which case, the payment of any dividend otherwise payable will be made on the immediately preceding Business Day, with dividends accruing to the actual payment date (each such day on which dividends are payable for any Dividend Period (as defined below) after the Dividend Period to, but excluding, August 15, 2026, a “Dividend Payment Date”). The period from and including the date of issuance of the Series T Preferred Stock or any Dividend Payment Date to, but excluding, the next Dividend Payment Date is a “Dividend Period.” Dividends on each share of Series T Preferred Stock will accrue on the liquidation preference of $25,000 per share at a rate per annum equal to (i) 6.250%, for each Dividend Period from and including the date of issuance to, but excluding, August 15, 2026 and (ii) Three-month LIBOR plus 4.517%, for each Dividend Period from and including August 15, 2026. The record date for payment of dividends on the Series T Preferred Stock will be the record date fixed by the Board of Directors or any other duly authorized committee thereof that is not more than 30 nor less than 10 days prior to such Dividend Payment Date (each, a “Dividend Record Date”). Any such day that is a Dividend Record Date will be a Dividend Record Date whether or not such day is a Business Day. The amount of dividends payable on or prior to August 15, 2026 will be computed on the basis of a 360-day year of twelve 30-day months. The amount of dividends payable after August 15, 2026 will be computed on the basis of a 360-day year and the actual number of days elapsed.
(b) Noncumulative Dividends. If the Board of Directors or any duly authorized committee thereof does not declare a dividend on the Series T Preferred Stock for any Dividend Period prior to the related Dividend Payment Date, that dividend will not accrue, and the Company will have no obligation to pay, and Holders shall have no right to receive, a dividend for that Dividend Period on the related Dividend Payment Date or at any future time, whether or not dividends on the Series T Preferred Stock or any other Series of preferred stock or common stock are declared for any subsequent period. References herein to the “accrual” of dividends refer only to the determination of the amount of such dividend and do not imply that any right to a dividend arises prior to the date on which a dividend is declared.
(c) Priority of Dividends. So long as any share of Series T Preferred Stock remains outstanding, unless as to a Dividend Payment Date full dividends on all outstanding shares of the
Series T Preferred Stock have been declared and paid or declared and a sum sufficient for the payment of those dividends has been set aside for the Dividend Period then ending, the Company will not, and will cause its subsidiaries not to, during the next succeeding Dividend Period that commences on such Dividend Payment Date, declare or pay any dividend on, make any distributions relating to, or redeem, purchase, acquire or make a liquidation payment relating to, any Junior Stock, or make any guarantee payment with respect thereto, other than:
(i) purchases, redemptions or other acquisitions of shares of Junior Stock in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of employees, officers, directors or consultants;
(ii) purchases of shares of Common Stock pursuant to a contractually binding requirement to buy stock existing prior to the commencement of the then-current Dividend Period, including under a contractually binding stock repurchase plan;
(iii) as a result of an exchange or conversion of any class or Series of Junior Stock for any other class or Series of Junior Stock;
(iv) the purchase of fractional interests in shares of Junior Stock pursuant to the conversion or exchange provisions of such Junior Stock or the security being converted or exchanged;
(v) the purchase of Junior Stock by an investment banking subsidiary of the Company in connection with the distribution thereof; or
(vi) the purchase of Junior Stock by any investment banking subsidiary of the Company in connection with market-making or other secondary market activities in the ordinary course of the business of such subsidiary.
The restrictions set forth in the preceding provisions of this Section 4(c) shall not apply to any Junior Stock dividends paid by the Company where the dividend is in the form of the same stock (or the right to buy the same stock) as that on which the dividend is being paid.
Except as provided below, for so long as any share of Series T Preferred Stock remains outstanding, if dividends are not declared and paid in full upon the shares of Series T Preferred Stock and any class or Series of stock of the Company now existing or hereafter authorized that ranks equally with the Series T Preferred Stock in the payment of dividends, all dividends declared upon shares of Series T Preferred Stock and such other stock will be declared on a proportional basis so that the amount of dividends declared per share will bear to each other the same ratio that accrued dividends for the then-current Dividend Period per share of Series T Preferred Stock and accrued dividends for the then-current Dividend Period per share of such other stock (including, in the case of any such other stock that bears cumulative dividends, all accrued and unpaid dividends) bear to each other.
Subject to the foregoing, and not otherwise, such dividends payable in cash, stock or otherwise, as may be determined by the Board of Directors or any duly authorized committee thereof, may be declared and paid on any other class or Series of stock of the Company from
time to time out of any funds legally available for such payment, and Holders will not be entitled to participate in those dividends.
Section 5. Liquidation Rights.
(a) Liquidation. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company, Holders shall be entitled, out of funds legally available therefor, before any distribution or payment may be made by the Company or set aside for the holders of any Junior Stock and subject to the rights of the holders of any class or Series of stock ranking senior to or on parity with Series T Preferred Stock upon liquidation and the rights of the Company’s depositors and other creditors, to receive in full a liquidating distribution in the amount of the liquidation preference of $25,000 per share (the “Series T Liquidation Preference”), plus any accrued dividends thereon from the last Dividend Payment Date to, but excluding, the date of the liquidation, dissolution or winding up if and to the extent declared but not yet paid. Holders shall not be entitled to any further payments in the event of any such voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company other than what is expressly provided for in this Section 5.
(b) Partial Payment. If the assets of the Company are not sufficient to pay in full the aforesaid liquidation distributions to the Holders and any liquidation distributions owed to holders of any class or Series of stock of the Company ranking equally with the Series T Preferred Stock in the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the Company, the amounts paid to the Holders and to the holders of all such equally ranking stock shall be pro rata in accordance with the respective aggregate liquidating distributions to which they would otherwise be entitled.
(c) Merger, Consolidation and Sale of Assets Not Liquidation. For purposes of this Section 5, the sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the property and assets of the Company shall not be deemed a voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, nor shall the merger, consolidation or any other business combination transaction of the Company into or with any other corporation or Person or the merger, consolidation or any other business combination transaction of any other corporation or Person into or with the Company be deemed to be a voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company.
Section 6. Redemption.
(a) Optional Redemption. The Company, at the option of its Board of Directors or any duly authorized committee thereof, may redeem out of funds legally available therefor, (i) in whole or in part, from time to time, the shares of Series T Preferred Stock at the time outstanding, on any Dividend Payment Date on or after August 15, 2026, or (ii) in whole but not in part at any time within 90 days following a Regulatory Capital Event, in each case at a redemption price equal to $25,000 per share plus any declared and unpaid dividends, without
accumulation of any undeclared dividends, to, but excluding, the redemption date, upon notice given as provided in Section 6(b) below.
(b) Notice of Redemption. Notice of every redemption of shares of Series T Preferred Stock shall be mailed by first class mail, postage prepaid, addressed to the Holders of such shares to be redeemed at their respective last addresses appearing on the stock register of the Company. Such mailing shall be at least 30 days and not more than 60 days before the date fixed for redemption. Any notice mailed as provided in this Section 6(b) shall be conclusively presumed to have been duly given, whether or not the Holder receives such notice, but failure duly to give such notice by mail, or any defect in such notice or in the mailing thereof, to any Holder of shares of Series T Preferred Stock designated for redemption shall not affect the validity of the proceedings for the redemption of any other shares of Series T Preferred Stock. Each notice shall state:
(i) the redemption date;
(ii) the total number of shares of Series T Preferred Stock to be redeemed and, if fewer than all the shares of a Holder are to be redeemed, the number of such shares to be redeemed;
(iii) the redemption price;
(iv) the place or places where the certificates for such shares are to be surrendered for payment of the redemption price, if applicable; and
(v) that dividends on the shares to be redeemed will cease to accrue on the redemption date.
Notwithstanding the foregoing, if the certificates evidencing the shares of Series T Preferred Stock are held of record by a depositary and any related depository shares are held of record by a Depositary or its nominee, the Company may give such notice in any manner permitted by the Depositary.
(c) Partial Redemption. In case of any redemption of only part of the shares of Series T Preferred Stock at the time outstanding, the shares of Series T Preferred Stock to be redeemed shall be selected (i) pro rata from the Holders in proportion to the number of shares of Series T Preferred Stock held by such Holders, (ii) by lot or (iii) in such other manner as the Board of Directors or any duly authorized committee thereof may determine, in its sole discretion, to be fair and equitable. Subject to the provisions of this Section 6, the Board of Directors or any duly authorized committee thereof shall have full power and authority to prescribe the terms and conditions upon which shares of Series T Preferred Stock shall be redeemed from time to time.
(d) Effectiveness of Redemption. If notice of redemption has been duly given and if on or before the redemption date specified in the notice all funds necessary for the redemption have been set aside by the Company, separate and apart from its other assets, for the pro rata benefit of the Holders of the shares called for redemption, so as to be and continue to be available therefor,
or deposited by the Company with a bank or trust company selected by the Board of Directors or any duly authorized committee thereof (the “Trust”) in trust for the pro rata benefit of the Holders of the shares called for redemption, then, notwithstanding that any certificate for any share so called for redemption has not been surrendered for cancellation, on and after the redemption date all shares so called for redemption shall cease to be outstanding, all dividends with respect to such shares shall cease to accrue on such redemption date, and all rights with respect to such shares shall forthwith on such redemption date cease and terminate, except only the right of the Holders thereof to receive the amount payable on such redemption from the Trust at any time after the redemption date from the funds so deposited, without interest. The Company shall be entitled to receive, from time to time, from the Trust any interest accrued on such funds, and the Holders of any shares called for redemption shall have no claim to any such interest. Any funds so deposited and unclaimed at the end of three years from the redemption date shall, to the extent permitted by law, be released or repaid to the Company, and in the event of such repayment to the Company, the Holders of the shares so called for redemption shall be deemed to be unsecured creditors of the Company for an amount equivalent to the amount deposited as stated above for the redemption of such shares and so repaid to the Company, but shall in no event be entitled to any interest.
Section 7. Voting Rights.
(a) General. The Holders shall not be entitled to vote on any matter except as set forth in Section 7(b) below or as required by the Delaware General Corporation Law.
(b) Special Voting Right.
(i) Voting Right. If and whenever dividends on the Series T Preferred Stock or any other class or Series of preferred stock that ranks on parity with Series T Preferred Stock as to payment of dividends and upon which voting rights equivalent to those granted by this Section 7(b)(i) have been conferred and are exercisable (any such class or series being referred to herein as “dividend parity stock”) have not been paid in an aggregate amount equal, as to any class or series, to at least three semi-annual or six quarterly Dividend Periods, as applicable, (whether consecutive or not) (a “Nonpayment”), the authorized number of directors constituting the Board of Directors shall be increased by two, and the Holders, together with holders of dividend parity stock, shall have the right, voting separately as a single class without regard to class or series (and with voting rights allocated pro rata based on the liquidation preference of each such class or series), to the exclusion of the holders of Common Stock, to elect two directors of the Company to fill such newly created directorships (and to fill any vacancies in the terms of such directorships), provided that it shall be a qualification for election of any such director that the election of such director shall not cause the Company to violate the corporate governance requirements of the New York Stock Exchange (or other exchange on which the Company’s securities may be listed) that listed companies must have a majority of independent directors and further provided that the Board of Directors shall at no time include more than two such directors. Each such director elected by the Holders together with holders of dividend parity stock is a “Preferred Stock Director.”
(ii) Election. The election of the Preferred Stock Directors will take place at any annual meeting of stockholders or any special meeting of the Holders and any dividend parity stock, called as provided herein. At any time after the special voting power has vested pursuant to Section 7(b)(i) above, the secretary of the Company may, and upon the written request (addressed to the secretary at the Company’s principal office) of the holders of at least 20% of the voting power of the Series T Preferred Stock or the holders of at least 20% of the voting power of any Series of dividend parity stock (with such voting power measured based on the voting power to elect Preferred Stock Directors), must (unless such request is received less than 90 days before the date fixed for the next annual or special meeting of the stockholders of the Company, in which event such election shall be held at such next annual or special meeting of stockholders), call a special meeting of the holders of Series T Preferred Stock and any dividend parity stock for the purposes of electing Preferred Stock Directors. The Preferred Stock Directors shall each be entitled to one vote per director on any matter.
(iii) Notice of Special Meeting. Notice for a special meeting to elect Preferred Stock Directors will be given in a similar manner to that provided in the Company’s by-laws for a special meeting of the stockholders. If the secretary of the Company does not call a special meeting within 20 days after receipt of any such request, then any Holder may (at the expense of the Company) call such meeting, upon notice as provided in this Section 7(b)(iii), and for that purpose will have access to the stock register of the Company. The Preferred Stock Directors elected at any such special meeting and each Preferred Stock Director elected at a subsequent annual or special meeting of stockholders, will be elected for term expiring upon the earlier of the Preferred Stock Director Termination Date and the next annual meeting of stockholders following such Preferred Stock Director's election. In case any vacancy in the office of a Preferred Stock Director occurs (other than prior to the initial election of the Preferred Stock Directors), the vacancy may be filled by the Preferred Stock Director remaining in office, or if none remains in office, by a plurality of the votes cast by the holders of Series T Preferred Stock and any dividend parity stock, voting together as a single class, and the Preferred Stock Director so appointed or elected to fill such vacancy shall serve for a term expiring at the next annual meeting of the stockholders. Preferred Stock Directors may only be elected by the holders of Series T Preferred Stock and dividend parity stock in accordance with this Section 7. If the holders of Series T Preferred Stock and such dividend parity stock fail to elect a sufficient number of directors to fill all directorships for which they are entitled to elect directors pursuant to this Section 7, then any directorship not so filled shall remain vacant until such time as the holders of Series T Preferred Stock and such dividend parity stock elect a person to fill such directorship in accordance with this Section 7, or such vacancy is otherwise filled in accordance with this Section 7; and no such directorship may be filled by stockholders of the Corporation other than in accordance with this Section 7.
(iv) Termination; Removal. Whenever the Company has paid noncumulative dividends in full for at least two consecutive semi-annual or four consecutive quarterly
Dividend Periods following a Nonpayment on the Series T Preferred Stock and on any dividend parity stock entitled to noncumulative dividends and has paid cumulative dividends in full on any dividend parity stock entitled to cumulative dividends, then the right of the Holders to elect the Preferred Stock Directors will cease (but subject always to the same provisions for the vesting of the special voting rights in the case of any similar non-payment of dividends in respect of future Dividend Periods) (the time of such cessation, the “Preferred Stock Director Termination Date”). Upon a Preferred Stock Director Termination Date, the terms of office of the Preferred Stock Directors will immediately terminate, the persons then serving as Preferred Stock Directors shall immediately cease to be qualified to hold office as Preferred Stock Directors, the Preferred Stock Directors shall cease to be directors of the Company and the number of directors constituting the Board of Directors shall be automatically reduced, without any action by the Board of Directors or the stockholders of the Company, by the number of Preferred Stock Directors authorized immediately prior to such termination. Any Preferred Stock Director may be removed at any time without cause by the holders of a majority of the voting power of outstanding shares of the capital stock then entitled to vote in the election of Preferred Stock Directors, voting together as a single class (with such voting power measured based on the voting power to elect Preferred Stock Directors).
(c) Senior Issuances; Adverse Changes. So long as any shares of Series T Preferred Stock are outstanding, but subject to the final paragraph of this Section 7(c), in addition to any other vote or consent of holders of the Company’s capital stock required by Delaware law, the vote or consent of the holders of at least two-thirds of the voting power of the Series T Preferred Stock and the holders of any other preferred stock entitled to vote thereon, voting together as a single class, given in person or by proxy at an annual or special meeting of stockholders, or given in writing without a meeting, will be necessary for effecting or validating any of the following actions, whether or not such approval is required by Delaware law:
(i) any amendment, alteration or repeal of any provision of the Company’s certificate of incorporation (including the certificate of designations creating the Series T Preferred Stock) or the Company’s by-laws that would alter or change the voting powers, preferences, economic rights or special rights of the Series T Preferred Stock so as to affect them adversely;
(ii) any amendment or alteration of the Company’s certificate of incorporation to authorize or create, or increase the authorized amount of, any shares of, or any securities convertible into shares of, any class or Series of the Company's capital stock ranking prior to the Series T Preferred Stock in the payment of dividends or in the distribution of assets on any liquidation, dissolution, or winding up of the Company; or
(iii) the consummation of a binding share exchange or reclassification involving the Series T Preferred Stock or a merger or consolidation of the Company with another entity, except that holders of Series T Preferred Stock will have no right to vote under this provision or otherwise under Delaware law if in each case (i) the Series T Preferred Stock remains outstanding or, in the case of any such merger or consolidation with respect to
which the Company is not the surviving or resulting entity, is converted into or exchanged for preferred securities of the surviving or resulting entity or its ultimate parent, that is an entity organized and existing under the laws of the United States of America, any state thereof or the District of Columbia and that is a corporation for U.S. federal income tax purposes (or if such entity is not a corporation, the Company having received an opinion of nationally recognized counsel experienced in such matters to the effect that Holders will be subject to tax for U.S. federal income tax purposes with respect to such new preferred securities after such merger or consolidation in the same amount, at the same time and otherwise in the same manner as would have been the case under the Series T Preferred Stock prior to such merger or consolidation), and (ii) such Series T Preferred Stock remaining outstanding or such preferred securities, as the case may be, have such rights, preferences, privileges and voting powers, taken as a whole, as are not materially less favorable to the holders thereof than the rights, preferences, privileges and voting powers of the Series T Preferred Stock, taken as a whole;
provided, however, that, for the avoidance of doubt, any increase in the amount of the authorized or issued Series T Preferred Stock or authorized preferred stock or any securities convertible into preferred stock or the creation and issuance, or an increase in the authorized or issued amount, of other Series of preferred stock or any securities convertible into preferred stock ranking equally with and/or junior to the Series T Preferred Stock with respect to the payment of dividends (whether such dividends are cumulative or noncumulative) and/or the distribution of assets upon the Company’s liquidation, dissolution or winding up will not be deemed to adversely affect the voting powers, preferences or special rights of the Series T Preferred Stock, and no stockholder will have the right to vote on such an increase, creation or issuance by reason of this Section 7.
If any amendment, alteration, repeal, share exchange, reclassification, merger or consolidation specified in this Section 7(c) would adversely affect the Series T Preferred Stock but not all Series of preferred stock of the Company, then only such Series of preferred stock as are adversely affected by and entitled to vote on the matter shall vote on the matter together with the Series T Preferred Stock as a single class (in lieu of all other Series of preferred stock) for purposes of the vote or consent required by this Section 7(c).
(d) No Vote if Redemption. No vote or consent of the Holders shall be required pursuant to Section 7(b) or 7(c) if, at or prior to the time when the act with respect to such vote or consent would otherwise be required shall be effected, the Company shall have redeemed or shall have called for redemption all outstanding shares of Series T Preferred Stock, with proper notice and sufficient funds having been set aside for such redemption, in each case pursuant to Section 6 above.
Section 8. Preemption and Conversion Rights.
The Holders shall not have any preemptive rights or conversion rights as a result of the terms hereof.
Section 9. Rank.
For the avoidance of doubt, the Board of Directors or any duly authorized committee thereof may, without the vote of the Holders, authorize and issue additional shares of Junior Stock or shares of any class or Series of stock of the Company now existing or hereafter authorized that ranks equally with the Series T Preferred Stock in the payment of dividends or in the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the Company.
Section 10. Reacquired Shares.
The Board of Directors shall take such actions as are necessary to cause the shares of Series T Preferred Stock which have been redeemed or otherwise purchased or acquired by the Company to be retired and restored to the status of authorized but unissued shares of preferred stock without designation as to series.
Section 11. No Sinking Fund.
Shares of Series T Preferred Stock are not subject to the operation of a sinking fund.
Section 12. Transfer Agent, Calculation Agent, Registrar and Paying Agent.
The duly appointed Transfer Agent, Calculation Agent, Registrar and paying agent for the Series T Preferred Stock shall be Computershare Trust Company, N.A. The Company may, in its sole discretion, remove the Transfer Agent in accordance with the agreement between the Company and the Transfer Agent; provided, however, that the Company shall appoint a successor transfer agent who shall accept such appointment prior to the effectiveness of such removal. Upon any such removal or appointment, the Company shall send notice thereof by first-class mail, postage prepaid, to the Holders.
Section 13. Replacement Certificates for Mutilated, Destroyed, Stolen and Lost Certificates.
If physical certificates are issued, the Company shall replace any mutilated certificate at the Holder’s expense upon surrender of that certificate to the Transfer Agent. The Company shall replace certificates that become destroyed, stolen or lost at the Holder’s expense upon delivery to the Company and the Transfer Agent of satisfactory evidence that the certificate has been destroyed, stolen or lost, together with any indemnity that may be required by the Transfer Agent and the Company.
Section 14. Form.
(a) Series T Preferred Stock Certificates. Series T Preferred Stock shall be issued in certificated form in substantially the form attached hereto as Exhibit A (each, a “Series T Preferred Stock Certificate”). Exhibit A is hereby incorporated in and expressly made a part of this Certificate of Designations. The Series T Preferred Stock Certificates may have notations, legends or endorsements required by law, stock exchange rules, agreements to which the Company is subject, if any, or usage (provided that any such notation, legend or endorsement is in a form acceptable to the Company).
(b) Signature. Two Officers shall sign any Series T Preferred Stock Certificate for the Company, in accordance with the Company’s by-laws and applicable law, by manual or facsimile signature. If an Officer whose signature is on a Series T Preferred Stock Certificate no longer holds that office at the time the Transfer Agent countersigned the Series T Preferred Stock Certificate, such Series T Preferred Stock Certificate shall be valid nevertheless. A Series T Preferred Stock Certificate shall not be valid until an authorized signatory of the Transfer Agent manually countersigns such Series T Preferred Stock Certificate. Each Series T Preferred Stock Certificate shall be dated the date of its countersignature.
Section 15. Taxes.
(a) Transfer Taxes. The Company shall pay any and all stock transfer, documentary, stamp and similar taxes that may be payable in respect of any issuance or delivery of shares of Series T Preferred Stock. The Company shall not, however, be required to pay any such tax that may be payable in respect of any transfer involved in the issuance or delivery of shares of Series T Preferred Stock, in a name other than that in which the shares of Series T Preferred Stock were registered, or in respect of any payment to any Person other than a payment to the registered holder thereof, and shall not be required to make any such issuance, delivery or payment unless and until the Person otherwise entitled to such issuance, delivery or payment has paid to the Company the amount of any such tax or has established, to the satisfaction of the Company, that such tax has been paid or is not payable.
(b) Withholding. All payments and distributions (or deemed distributions) on the shares of Series T Preferred Stock shall be subject to withholding and backup withholding of tax to the extent required by law, subject to applicable exemptions, and amounts withheld, if any, shall be treated as received by Holders.
Section 16. Notices.
All notices referred to herein shall be in writing, and, unless otherwise specified herein, all notices hereunder shall be deemed to have been given upon the earlier of receipt thereof or three Business Days after the mailing thereof if sent by registered or certified mail (unless first class mail shall be specifically permitted for such notice under the terms of this Certificate of Designations) with postage prepaid, addressed: (i) if to the Company, to its office at 388 Greenwich Street, New York, New York 10013 (Attention: Corporate Secretary) or to the Transfer Agent at its office at 250 Royall Street, Canton, Massachusetts 02021, or other agent of
the Company designated as permitted by this Certificate of Designations, or (ii) if to any Holder, to such Holder at the address of such Holder as listed in the stock record books of the Company (which may include the records of the Transfer Agent) or (iii) to such other address as the Company or any such Holder, as the case may be, shall have designated by notice similarly given.
Section 17. Other Rights Disclaimed.
The shares of Series T Preferred Stock have no voting powers, preferences or relative, participating, optional or other special rights, or qualifications, limitations or restrictions thereof, other than as set forth herein or in the Certificate of Incorporation of the Company.
IN WITNESS WHEREOF, this Certificate of Designations has been executed on behalf of the Company by its Chief Accounting Officer this 22nd day of April, 2016.
CITIGROUP INC.
By: /s/ Jeffrey R. Walsh
Name: Jeffrey R. Walsh
Title: Chief Accounting Officer
Exhibit A
FORM OF
6.250 % FIXED RATE / FLOATING RATE NONCUMULATIVE PREFERRED STOCK, SERIES T
Certificate Number_______ Number of Shares of Series T Preferred Stock______
CUSIP NO.:
CITIGROUP INC.
6.250% Fixed Rate / Floating Rate Noncumulative Preferred Stock, Series T
(par value $1.00 per share)
(liquidation preference $25,000 per share)
Citigroup Inc., a Delaware corporation (the “Company”), hereby certifies that [ ] (the “Holder”) is the registered owner of [ ] fully paid and non-assessable shares of the Company’s designated 6.250% Fixed Rate / Floating Rate Noncumulative Preferred Stock, Series T, with a par value of $1.00 per share and a liquidation preference of $25,000 per share (the “Series T Preferred Stock”). The shares of Series T Preferred Stock are transferable on the books and records of the Registrar, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer. The designations, rights, privileges, restrictions, preferences and other terms and provisions of the Series T Preferred Stock represented hereby are and shall in all respects be subject to the provisions of the Certificate of Designations dated April 22, 2016 as the same may be amended from time to time (the “Certificate of Designations”). Capitalized terms used herein but not defined shall have the meaning given them in the Certificate of Designations. The Company will provide a copy of the Certificate of Designations to a Holder without charge upon written request to the Company at its principal place of business.
Reference is hereby made to select provisions of the Series T Preferred Stock set forth on the reverse hereof, and to the Certificate of Designations, which select provisions and the Certificate of Designations shall for all purposes have the same effect as if set forth at this place.
Upon receipt of this certificate, the Holder is bound by the Certificate of Designations and is entitled to the benefits thereunder.
Unless the Registrar has properly countersigned, these shares of Series T Preferred Stock shall not be entitled to any benefit under the Certificate of Designations or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, this certificate has been executed on behalf of the Company by its [Title] and by its [Title] this __ day of _______, ________.
CITIGROUP INC.
By: _______________________________________
Name:
Title:
By: _______________________________________
Name:
Title:
REGISTRAR’S COUNTERSIGNATURE
These are shares of Series T Preferred Stock referred to in the within-mentioned Certificate of Designations.
Dated:
COMPUTERSHARE TRUST COMPANY, N.A., as Registrar
By: _______________________________________
Name:
Title:
REVERSE OF CERTIFICATE
Dividends on each share of Series T Preferred Stock shall be payable at the rate provided in the Certificate of Designations.
The shares of Series T Preferred Stock shall be redeemable at the option of the Company in the manner and in accordance with the terms set forth in the Certificate of Designations.
The Company shall furnish without charge to each holder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class or Series of share capital issued by the Company and the qualifications, limitations or restrictions of such preferences and/or rights.
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers the shares of Series T Preferred Stock evidenced hereby to:
___________________________________________________
___________________________________________________
(Insert assignee’s social security or taxpayer identification number, if any)
___________________________________________________
___________________________________________________
(Insert address and zip code of assignee)
and irrevocably appoints:
___________________________________________________
___________________________________________________
as agent to transfer the shares of Series T Preferred Stock evidenced hereby on the books of the Transfer Agent. The agent may substitute another to act for him or her.
Date:
Signature:
___________________________________________________
(Sign exactly as your name appears on the other side of this Certificate)
Signature Guarantee: ___________________________________________________
(Signature must be guaranteed by an “eligible guarantor institution” that is a bank, stockbroker, savings and loan association or credit union meeting the requirements of the Transfer Agent, which requirements include membership or participation in the Securities Transfer Agents Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Transfer Agent in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.)
CERTIFICATE OF RETIREMENT
OF PREFERRED STOCK
OF CITIGROUP INC.
(Pursuant to Section 243 of the General
Corporation Law of the State of Delaware)
CITIGROUP INC., a corporation duly organized and existing under the General Corporation Law of the State of Delaware, certifies as follows:
FIRST: Citigroup's Restated Certificate of Incorporation, as amended (the "Certificate of Incorporation"), authorizes the issuance of 149,500 shares of 8.125% Non-Cumulative Preferred Stock, Series AA (the "Preferred Stock, Series AA"), each such share with $1.00 par value and a stated value of $25,000 per share.
SECOND: Citigroup has retired all of the authorized shares of the Preferred Stock, Series AA.
THIRD: Pursuant to the provisions of Section 243 of the General Corporation Law of the State of Delaware, the shares that were designated to Preferred Stock, Series AA are hereby returned to the status of authorized but unissued shares of the Preferred Stock of Citigroup Inc.
IN WITNESS WHEREOF, CITIGROUP INC. has caused this certificate to be signed by the below duly authorized Assistant Treasurer this 20th day of February, 2018.
CITIGROUP INC.
By: /s/Elissa Steinberg______________
Elissa Steinberg
Assistant Treasurer
CERTIFICATE OF RETIREMENT
OF PREFERRED STOCK
OF CITIGROUP INC.
(Pursuant to Section 243 of the General
Corporation Law of the State of Delaware)
CITIGROUP INC., a corporation duly organized and existing under the General Corporation Law of the State of Delaware, certifies as follows:
FIRST: Citigroup's Restated Certificate of Incorporation, as amended (the "Certificate of Incorporation"), authorizes the issuance of 240,000 shares of 8.40% Fixed Rate / Floating Rate Non-Cumulative Preferred Stock, Series E (the "Preferred Stock, Series E"), each such share with $1.00 par value and a stated value of $25,000 per share.
SECOND: Citigroup has retired all of the authorized shares of the Preferred Stock, Series E.
THIRD: Pursuant to the provisions of Section 243 of the General Corporation Law of the State of Delaware, the shares that were designated to Preferred Stock, Series E are hereby returned to the status of authorized but unissued shares of the Preferred Stock of Citigroup Inc.
IN WITNESS WHEREOF, CITIGROUP INC. has caused this certificate to be signed by the below duly authorized Assistant Treasurer this 4th day of May, 2018.
CITIGROUP INC.
By:_/s/ Elissa Steinberg____________
Elissa Steinberg
Assistant Treasurer
CERTIFICATE OF RETIREMENT
OF PREFERRED STOCK
OF CITIGROUP INC.
(Pursuant to Section 243 of the General
Corporation Law of the State of Delaware)
CITIGROUP INC., a corporation duly organized and existing under the General Corporation Law of the State of Delaware, certifies as follows:
FIRST: Citigroup's Restated Certificate of Incorporation, as amended (the "Certificate of Incorporation"), authorizes the issuance of 23,000 shares of 5.80% Non-Cumulative Preferred Stock, Series C (the "Preferred Stock, Series C"), each such share with $1.00 par value and a stated value of $25,000 per share.
SECOND: Citigroup has retired all of the authorized shares of the Preferred Stock, Series C.
THIRD: Pursuant to the provisions of Section 243 of the General Corporation Law of the State of Delaware, the shares that were designated to Preferred Stock, Series C are hereby returned to the status of authorized but unissued shares of the Preferred Stock of Citigroup Inc.
IN WITNESS WHEREOF, CITIGROUP INC. has caused this certificate to be signed by the below duly authorized Assistant Treasurer this 1st day of November, 2018.
CITIGROUP INC.
By:_/s/Elissa Steinberg____________
Elissa Steinberg
Assistant Treasurer
CERTIFICATE OF RETIREMENT
OF PREFERRED STOCK
OF CITIGROUP INC.
(Pursuant to Section 243 of the General
Corporation Law of the State of Delaware)
CITIGROUP INC., a corporation duly organized and existing under the General Corporation Law of the State of Delaware, certifies as follows:
FIRST: Citigroup's Restated Certificate of Incorporation, as amended (the "Certificate of Incorporation"), authorizes the issuance of 19,200 shares of 6.875% Non-Cumulative Preferred Stock, Series L (the "Preferred Stock, Series L"), each such share with $1.00 par value and a stated value of $25,000 per share.
SECOND: Citigroup has retired all of the authorized shares of the Preferred Stock, Series L.
THIRD: Pursuant to the provisions of Section 243 of the General Corporation Law of the State of Delaware, the shares that were designated to Preferred Stock, Series L are hereby returned to the status of authorized but unissued shares of the Preferred Stock of Citigroup Inc.
IN WITNESS WHEREOF, CITIGROUP INC. has caused this certificate to be signed by the below duly authorized Assistant Treasurer this 27th day of February, 2019.
CITIGROUP INC.
By: /s/Elissa Steinberg_____________
Elissa Steinberg
Assistant Treasurer
CERTIFICATE OF DESIGNATIONS
OF
5.000% FIXED RATE / FLOATING RATE NONCUMULATIVE PREFERRED STOCK SERIES U
OF
CITIGROUP INC.
______________________________
pursuant to Section 151 of the
General Corporation Law of the State of Delaware
______________________________
Citigroup Inc., a Delaware corporation (the “Company”), hereby certifies that:
1. The Restated Certificate of Incorporation of the Company (as amended through the date hereof, the “Certificate of Incorporation”) fixes the total number of shares of all classes of capital stock that the Company shall have the authority to issue at six billion (6,000,000,000) shares of common stock, par value $0.01 per share, and thirty million (30,000,000) shares of preferred stock, par value $1.00 per share.
2. The Certificate of Incorporation expressly grants to the Board of Directors of the Company (the “Board of Directors”) authority to provide for the issuance of the shares of preferred stock in series, and to establish from time to time the number of shares to be included in each such series and to fix the designation, powers, preferences and rights of the shares of each such series and the qualifications, limitations or restrictions thereof.
3. Pursuant to the authority conferred upon a preferred stock committee (the “Preferred Stock Committee”) by the Board of Directors, the Preferred Stock Committee, by action duly taken on September 5, 2019, adopted resolutions (i) authorizing the issuance and sale of up to 60,000 shares of the Company’s preferred stock and (ii) approving this final form of Certificate of Designations of 5.000% Fixed Rate / Floating Rate Noncumulative Preferred Stock, Series U (the “Series U Preferred Stock”), establishing the number of shares to be included in this Series U Preferred Stock and fixing the designation, powers, preferences and rights of the shares of this Series U Preferred Stock and the qualifications, limitations or restrictions thereof as follows:
Section 1. Designation.
The designation of the Series of preferred stock shall be “5.000% Fixed Rate / Floating Rate Noncumulative Preferred Stock, Series U” (the “Series U Preferred Stock”). Each share of
Series U Preferred Stock shall be identical in all respects to every other share of Series U Preferred Stock.
Section 2. Number of Shares.
The number of authorized shares of Series U Preferred Stock shall be 60,000. That number from time to time may be increased (but not in excess of the total number of authorized shares of preferred stock) or decreased (but not below the number of shares of Series U Preferred Stock then outstanding) by further resolution duly adopted by the Board of Directors, the Preferred Stock Committee or any other duly authorized committee thereof and by the filing of a certificate pursuant to the provisions of the General Corporation Law of the State of Delaware stating that such increase or reduction, as the case may be, has been so authorized. The Company shall have the authority to issue fractional shares of Series U Preferred Stock.
Section 3. Definitions. As used herein with respect to Series U Preferred Stock:
“Accrued Dividend Compounding Factor” shall have the meaning set forth in Section 4(a) hereof.
“Appropriate Federal Banking Agency” means the “appropriate Federal banking agency” with respect to the Company as that term is defined in Section 3(q) of the Federal Deposit Insurance Act of 1950, as amended, or any successor provision.
“Benchmark” shall have the meaning set forth in Section 4(a) hereof.
“Benchmark Replacement” shall have the meaning set forth in Section 4(a) hereof.
“Benchmark Replacement Adjustment” shall have the meaning set forth in Section 4(a) hereof.
“Benchmark Replacement Conforming Changes” shall have the meaning set forth in Section 4(a) hereof.
“Benchmark Replacement Date” shall have the meaning set forth in Section 4(a) hereof.
“Benchmark Transition Event” shall have the meaning set forth in Section 4(a) hereof.
“Board of Directors” has the meaning set forth in the recitals above.
“business day”, including with respect to the Fixed Rate Period, means any weekday that is not a legal holiday in New York City and is not a day on which banking institutions in New York City are authorized or required by law or regulation to be closed.
“Business Day” with respect to the Floating Rate Period means any weekday that is not a legal holiday in New York City and is not a day on which banking institutions in New York City are authorized or required by law or regulation to be closed and a U.S. Government Securities Business Day.
“Calculation Agent” means Citibank, N.A., London branch, and its successors and assigns.
“Common Stock” means the common stock of the Company, par value $0.01 per share, or any other shares of the capital stock of the Company into which such shares of common stock shall be reclassified or changed.
“Corresponding Tenor” shall have the meaning set forth in Section 4(a) hereof.
“Depositary” means DTC or its nominee or any successor depositary appointed by the Company.
“dividend payment date” shall have the meaning set forth in Section 4(a) hereof.
“dividend period” shall have the meaning set forth in Section 4(a) hereof.
“dividend period end date” shall have the meaning set forth in Section 4(a) hereof.
“Dividend Record Date” shall have the meaning set forth in Section 4(a) hereof.
“DTC” means The Depository Trust Company.
“Fixed Rate Period” shall have the meaning set forth in Section 4(a) hereof.
“Floating Rate Period” shall have the meaning set forth in Section 4(a) hereof.
“Holder” means the Person in whose name the shares of the Series U Preferred Stock are registered, which may be treated by the Company, Calculation Agent, Transfer Agent, Registrar and paying agent as the absolute owner of the shares of Series U Preferred Stock for the purpose of making payment and for all other purposes.
“ISDA” shall have the meaning set forth in Section 4(a) hereof.
“ISDA Definitions” shall have the meaning set forth in Section 4(a) hereof.
“ISDA Fallback Adjustment” shall have the meaning set forth in Section 4(a) hereof.
“ISDA Fallback Rate” shall have the meaning set forth in Section 4(a) hereof.
“Junior Stock” means the Common Stock and any other class or Series of stock of the
Company now existing or hereafter authorized over which Series U Preferred Stock has
preference or priority in the payment of dividends or in the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the Company.
“Nonpayment” shall have the meaning set forth in Section 7(b)(i) hereof.
“NY Federal Reserve’s website” shall have the meaning set forth in Section 4(a) hereof.
“Officer” means the Chief Executive Officer, the Chairman, the Chief Administrative Officer, any Vice Chairman, the Chief Financial Officer, the Controller, the Chief Accounting Officer, the Treasurer, any Deputy Treasurer, any Assistant Treasurer, any Vice President, the General Counsel and Corporate Secretary and any Assistant Secretary of the Company.
“Person” means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint-stock company, limited liability company, trust, or other entity.
“Preferred Stock Director” shall have the meaning set forth in Section 7(b)(i) hereof.
“Preferred Stock Director Termination Date” shall have the meaning set forth in Section 7(b)(iv) hereof.
“Rate Cut-Off Date” shall have the meaning set forth in Section 4(a) hereof.
“Reference Time” shall have the meaning set forth in Section 4(a) hereof.
“Registrar” means the Transfer Agent acting in its capacity as registrar for the Series U Preferred Stock, and its successors and assigns.
“Regulatory Capital Event” means the good faith determination by the Company that, as a result of (i) any amendment to, clarification of, or change in, the laws or regulations of the United States (including, for the avoidance of doubt, any agency or instrumentality of the United States, including the Federal Reserve and other federal bank regulatory agencies) or any political subdivision of or in the United States that is enacted or becomes effective after the initial issuance of any share of the Series U Preferred Stock, (ii) any proposed change in those laws or regulations that is announced or becomes effective after the initial issuance of any share of the Series U Preferred Stock, or (iii) any official administrative decision or judicial decision or administrative action or other official pronouncement interpreting or applying those laws or regulations or policies with respect thereto that is announced after the initial issuance of any share of the Series U Preferred Stock, there is more than an insubstantial risk that the Company will not be entitled to treat the full liquidation preference amount of $25,000 per share of the Series U Preferred Stock then outstanding as “tier 1 capital” (or its equivalent) for purposes of the capital adequacy guidelines of the Federal Reserve (or, as and if applicable, the capital adequacy guidelines or regulations of any successor Appropriate Federal Banking Agency) as then in effect and applicable, for so long as any share of the Series U Preferred Stock is outstanding.
“Relevant Governmental Body” shall have the meaning set forth in Section 4(a) hereof.
“Series U Liquidation Preference” shall have the meaning set forth in Section 5(a) hereof.
“Series U Preferred Stock” shall have the meaning set forth in Section 1 hereof.
“Series U Preferred Stock Certificate” shall have the meaning set forth in Section 14(a) hereof.
“SOFR” shall have the meaning set forth in Section 4(a) hereof.
“Transfer Agent” means Computershare Trust Company, N.A., a federally chartered national association, acting as Transfer Agent, Registrar and paying agent for the Series U Preferred Stock, and its successors and assigns.
“Trust” shall have the meaning set forth in Section 6(d).
“Unadjusted Benchmark Replacement” shall have the meaning set forth in Section 4(a) hereof.
“U.S. Government Securities Business Day” shall have the meaning set forth in Section 4(a) hereof.
Section 4. Dividends.
(a) Rate. Holders shall be entitled to receive, when, as and if declared by the Board of Directors or any duly authorized committee thereof, but only out of funds legally available therefor, noncumulative cash dividends on each share of Series U Preferred Stock in the amounts specified below in this Section 4, and no more, payable (i) semiannually in arrears on each March 12 and September 12, beginning March 12, 2020, from, and including, the date of issuance to, but excluding, September 12, 2024 (the “Fixed Rate Period”); provided, however, if any such day is not a business day, then payment of any dividend otherwise payable on that date will be made on the next succeeding day that is a business day, without any additional dividend accrual or other payment in respect of such postponement, and (ii) quarterly in arrears on the second Business Day following each dividend period end date, beginning on December 16, 2024, from, and including, September 12, 2024 (the “Floating Rate Period”) (each date for payment of dividends, a “dividend payment date”). A “dividend period end date” means the 12th of each March, June, September and December; provided, however, that if any dividend period end date (other than a redemption date) is not a Business Day, then such date will be postponed to the next succeeding Business Day, unless that day falls in the next calendar month, in which case the dividend period end date will be the immediately preceding Business Day. During the Fixed Rate Period, “dividend period” means the period from, and including, each dividend payment date to, but excluding, the next succeeding dividend payment date, except for the initial dividend period, which will be the period from, and including, the date of issuance of the Preferred Stock to, but excluding, the first dividend payment date. During the Floating Rate Period, “dividend period” means the period from, and including, each dividend period end date (except for the initial dividend period in the Floating Rate Period, “dividend period” means the period from, and including, September 12, 2024) to, but excluding, the next succeeding dividend period end date; provided that the dividend period following an election by the Company to redeem the Preferred Stock (as described in Section 6(a)) will be the period from, and including, the immediately preceding dividend period end date to, but excluding, the redemption date; and provided further that SOFR (as defined below) for each calendar day from, and including, the Rate Cut-Off Date to, but excluding, the redemption date will equal SOFR in respect of the Rate Cut-Off Date. The Rate Cut-Off Date will be the second U.S. Government Securities Business Day prior to a redemption date. Dividends on each share of Series U Preferred Stock will accrue on the liquidation preference of $25,000 per share at a rate per annum equal to (i) 5.000%, for each dividend period in the Fixed Rate Period and (ii) SOFR (compounding daily over each dividend period as described below) plus 3.813%, for each dividend period in the Floating Rate Period, provided that in no event will the dividend payable on the Preferred Stock be less than zero. The record date for payment of dividends on the Series U Preferred Stock will be the record date fixed by the Board of Directors or any other duly authorized committee thereof that is not more than 30 nor less than 10 days prior to such dividend payment date (each, a “Dividend Record Date”). Any such day that is a Dividend Record Date will be a Dividend Record Date whether or not such day is a business day. The amount of dividends payable during the Fixed Rate Period will be computed on the basis of a 360-day year of twelve 30-day months. The amount of dividends payable during the Floating Rate Period will be computed on the basis of a 360-day year and the actual number of days elapsed.
For the purposes of calculating any dividend with respect to any dividend period during the Floating Rate Period:
“Accrued Dividend Compounding Factor” means the result of the following formula:
where
“do”, for any dividend period, is the number of U.S. Government Securities Business Days in the relevant dividend period.
“i” is a series of whole numbers from one to d0, each representing the relevant U.S. Government Securities Business Day in chronological order from, and including, the first U.S. Government Securities Business Day in the relevant dividend period.
“SOFRi”, for any day “i” in the relevant dividend period, is a reference rate equal to SOFR in respect of that day.
“ni”, for any day “i” in the relevant dividend period, is the number of calendar days from, and including, such U.S. Government Securities Business Day “i” to, but excluding, the following U.S. Government Securities Business Day.
“d” is the number of calendar days in the relevant dividend period.
“U.S. Government Securities Business Day” means any day except for a Saturday, Sunday or a day on which the Securities Industry and Financial Markets Association (SIFMA) recommends that the fixed income departments of its members be closed for the entire day for purposes of trading in U.S. government securities.
“SOFR,” with respect to any day, means the rate determined by the Calculation Agent in accordance with the following provisions:
(1)the Secured Overnight Financing Rate for trades made on such day that appears at approximately 3:00 p.m. (New York City time) on the NY Federal Reserve’s website on the U.S. Government Securities Business Day immediately following such U.S. Government Securities Business Day; or
(2)if the rate specified in (1) above does not so appear, unless a Benchmark Transition Event and its related Benchmark Replacement Date have occurred as described in (3) below, the Secured Overnight Financing Rate published on the NY Federal Reserve’s website for the first preceding U.S. Government Securities Business Day for which the Secured Overnight Financing Rate was published on the NY Federal Reserve’s
website; or
(3)if a Benchmark Transition Event and its related Benchmark Replacement Date have
occurred prior to the relevant dividend period end date, the Calculation Agent will use the Benchmark Replacement to determine the rate and for all other purposes relating to the Preferred Stock.
In connection with the SOFR definition above, the following definitions apply:
“Benchmark” means, initially, SOFR; provided that if a Benchmark Transition Event and its related Benchmark Replacement Date have occurred with respect to SOFR or the then-current Benchmark, then “Benchmark” means the applicable Benchmark Replacement.
“Benchmark Replacement” means the first alternative set forth in the order below that can be determined by the Company (or one of its affiliates) as of the Benchmark Replacement Date:
(1)the sum of: (a) the alternate rate of interest that has been selected or recommended by
the Relevant Governmental Body as the replacement for the then-current Benchmark for the applicable Corresponding Tenor and (b) the Benchmark Replacement Adjustment; or
(2)the sum of: (a) the ISDA Fallback Rate and (b) the Benchmark Replacement
Adjustment; or
(3)the sum of: (a) the alternate rate of interest that has been selected by the Company (or one of its affiliates) as the replacement for the then-current Benchmark for the applicable Corresponding Tenor giving due consideration to any industry-accepted rate of interest as a replacement for the then-current Benchmark for U.S. dollar-denominated floating rate notes at such time and (b) the Benchmark Replacement Adjustment.
“Benchmark Replacement Adjustment” means the first alternative set forth in the order below that can be determined by the Company (or one of its affiliates) as of the Benchmark Replacement Date:
(1)the spread adjustment, or method for calculating or determining such spread
adjustment, (which may be a positive or negative value or zero) that has been selected or recommended by the Relevant Governmental Body for the applicable Unadjusted Benchmark Replacement;
(2)if the applicable Unadjusted Benchmark Replacement is equivalent to the ISDA
Fallback Rate, then the ISDA Fallback Adjustment;
(3)the spread adjustment (which may be a positive or negative value or zero) that has
been selected by the Company (or one of its affiliates) giving due consideration to any industry-accepted spread adjustment, or method for calculating or determining
such spread adjustment, for the replacement of the then-current Benchmark with the applicable Unadjusted Benchmark Replacement for U.S. dollar-denominated floating
rate notes at such time.
“Benchmark Replacement Conforming Changes” means, with respect to any Benchmark Replacement, any technical, administrative or operational changes that the Company (or one of its affiliates) decides may be appropriate to reflect the adoption of such Benchmark Replacement in a manner substantially consistent with market practice (or, if the Company (or such affiliate) decides that adoption of any portion of such market practice is not administratively feasible or if the Company (or such affiliate) determines that no market practice for use of the Benchmark Replacement exists, in such other manner as the Company (or such affiliate) determines is reasonably necessary).
“Benchmark Replacement Date” means the earliest to occur of the following events with respect to the then-current Benchmark:
(1)in the case of clause (1) or (2) of the definition of “Benchmark Transition Event,” the
later of (a) the date of the public statement or publication of information referenced therein and (b) the date on which the administrator of the Benchmark permanently or indefinitely ceases to provide the Benchmark; or
(2)in the case of clause (3) of the definition of “Benchmark Transition Event,” the date
of the public statement or publication of information referenced therein.
For the avoidance of doubt, if the event giving rise to the Benchmark Replacement Date occurs on the same day as, but earlier than, the Reference Time in respect of any determination, the Benchmark Replacement Date will be deemed to have occurred prior to the Reference Time for such determination.
“Benchmark Transition Event” means the occurrence of one or more of the following events with respect to the then-current Benchmark:
(1)a public statement or publication of information by or on behalf of the administrator
of the Benchmark announcing that such administrator has ceased or will cease to provide the Benchmark, permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide the Benchmark;
(2)a public statement or publication of information by the regulatory supervisor for the
administrator of the Benchmark, the central bank for the currency of the Benchmark, an insolvency official with jurisdiction over the administrator for the Benchmark, a resolution authority with jurisdiction over the administrator for the Benchmark or a court or an entity with similar insolvency or resolution authority over the administrator for the Benchmark, which states that the administrator of the Benchmark has ceased or will cease to provide the Benchmark permanently or
indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide the Benchmark; or
(3)a public statement or publication of information by the regulatory supervisor for the
administrator of the Benchmark announcing that the Benchmark is no longer representative.
“Corresponding Tenor” with respect to a Benchmark Replacement means a tenor (including overnight) having approximately the same length (disregarding business day adjustment) as the applicable tenor for the then-current Benchmark.
“ISDA” means the International Swaps and Derivatives Association, Inc. or any successor.
“ISDA Definitions” means the 2006 ISDA Definitions published by the International Swaps and Derivatives Association, Inc. or any successor thereto, as amended or supplemented from time to time, or any successor definitional booklet for interest rate derivatives published from time to time.
“ISDA Fallback Adjustment” means the spread adjustment (which may be a positive or negative value or zero) that would apply for derivatives transactions referencing the ISDA Definitions to be determined upon the occurrence of an index cessation event with respect to the Benchmark for the applicable tenor.
“ISDA Fallback Rate” means the rate that would apply for derivatives transactions referencing the ISDA Definitions to be effective upon the occurrence of an index cessation date with respect to the Benchmark for the applicable tenor excluding the applicable ISDA Fallback Adjustment.
“NY Federal Reserve’s website” means the website of the Federal Reserve Bank of New York (the “NY Federal Reserve”), currently at http://www.newyorkfed.org, or any successor website of the NY Federal Reserve or the website of any successor administrator of the Secured Overnight Financing Rate.
“Rate Cut-Off Date” means the second U.S. Government Securities Business Day prior to a redemption date.
“Reference Time” with respect to any determination of the Benchmark means the time determined by the Company (or one of its affiliates) in accordance with the Benchmark Replacement Conforming Changes.
“Relevant Governmental Body” means the Federal Reserve Board and/or the NY Federal Reserve, or a committee officially endorsed or convened by the Federal Reserve Board and/or the NY Federal Reserve or any successor thereto.
“Unadjusted Benchmark Replacement” means the Benchmark Replacement excluding the Benchmark Replacement Adjustment.
Any determination, decision or election that may be made by the Company (or one of its affiliates) pursuant to the provisions described above, including any determination with respect to tenor, rate or adjustment or of the occurrence or non-occurrence of an event, circumstance or date and any decision to take or refrain from taking any action or any selection, will be conclusive and binding absent manifest error, will be made in the Company’s (or such affiliate’s) sole discretion, and, notwithstanding anything to the contrary in this Certificate of Designations, shall become effective without consent from the holders of the Series U Preferred Stock or any other party.
All percentages resulting from any calculation of the dividend rate will be rounded, if necessary, to the nearest 1/100,000 of 1% (.0000001), with five one-millionths of a percentage point rounded upward. All currency amounts used in, or resulting from, the calculation on the Series U Preferred Stock will be rounded to the nearest one-hundredth of a unit. For purposes of rounding, .005 of a unit shall be rounded upward.
(b) Noncumulative Dividends. If the Board of Directors or any duly authorized committee thereof does not declare a dividend on the Series U Preferred Stock for any dividend period prior to the related dividend payment date, that dividend will not accrue, and the Company will have no obligation to pay, and Holders shall have no right to receive, a dividend for that dividend period on the related dividend payment date or at any future time, whether or not dividends on the Series U Preferred Stock or any other Series of preferred stock or common stock are declared for any subsequent period. References herein to the “accrual” of dividends refer only to the determination of the amount of such dividend and do not imply that any right to a dividend arises prior to the date on which a dividend is declared.
(c) Priority of Dividends. So long as any share of Series U Preferred Stock remains outstanding, unless as to a dividend payment date full dividends on all outstanding shares of the Series U Preferred Stock have been declared and paid or declared and a sum sufficient for the payment of those dividends has been set aside for the dividend period then ending, the Company will not, and will cause its subsidiaries not to, during the next succeeding dividend period that commences on such dividend payment date during the Fixed Rate Period or dividend period end date during the Floating Rate Period, declare or pay any dividend on, make any distributions relating to, or redeem, purchase, acquire or make a liquidation payment relating to, any Junior Stock, or make any guarantee payment with respect thereto, other than:
(i) purchases, redemptions or other acquisitions of shares of Junior Stock in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of employees, officers, directors or consultants;
(ii) purchases of shares of Common Stock pursuant to a contractually binding requirement to buy stock existing prior to the commencement of the then-current dividend period, including under a contractually binding stock repurchase plan;
(iii) as a result of an exchange or conversion of any class or Series of Junior Stock for any other class or Series of Junior Stock;
(iv) the purchase of fractional interests in shares of Junior Stock pursuant to the conversion or exchange provisions of such Junior Stock or the security being converted or exchanged;
(v) the purchase of Junior Stock by an investment banking subsidiary of the Company in connection with the distribution thereof; or
(vi) the purchase of Junior Stock by any investment banking subsidiary of the Company in connection with market-making or other secondary market activities in the ordinary course of the business of such subsidiary.
The restrictions set forth in the preceding provisions of this Section 4(c) shall not apply to any Junior Stock dividends paid by the Company where the dividend is in the form of the same stock (or the right to buy the same stock) as that on which the dividend is being paid.
Except as provided below, for so long as any share of Series U Preferred Stock remains outstanding, if dividends are not declared and paid in full upon the shares of Series U Preferred Stock and any class or series of stock of the Company now existing or hereafter authorized that ranks equally with the Series U Preferred Stock in the payment of dividends, all dividends declared upon shares of Series U Preferred Stock and such other stock will be declared on a proportional basis so that the amount of dividends declared per share will bear to each other the same ratio that accrued dividends for the then-current dividend period per share of Series U Preferred Stock and accrued dividends for the then-current dividend period per share of such other stock (including, in the case of any such other stock that bears cumulative dividends, all accrued and unpaid dividends) bear to each other.
Subject to the foregoing, and not otherwise, such dividends payable in cash, stock or otherwise, as may be determined by the Board of Directors or any duly authorized committee thereof, may be declared and paid on any other class or series of stock of the Company from time to time out of any funds legally available for such payment, and Holders will not be entitled to participate in those dividends.
Section 5. Liquidation Rights.
(a) Liquidation. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company, Holders shall be entitled, out of funds legally available therefor, before any distribution or payment may be made by the Company or set aside for the holders of any Junior Stock and subject to the rights of the holders of any class or series of stock ranking senior to or on parity with Series U Preferred Stock upon liquidation and the rights of the Company’s depositors and other creditors, to receive in full a liquidating distribution in the amount of the liquidation preference of $25,000 per share (the “Series U Liquidation Preference”), plus any accrued dividends thereon from the last dividend payment date to, but excluding, the date of the liquidation, dissolution or winding up if and to the extent declared but not yet paid. Holders shall not be entitled to any further payments in the event of any such voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company other than what is expressly provided for in this Section 5.
(b) Partial Payment. If the assets of the Company are not sufficient to pay in full the aforesaid liquidation distributions to the Holders and any liquidation distributions owed to holders of any class or series of stock of the Company ranking equally with the Series U Preferred Stock in the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the Company, the amounts paid to the Holders and to the holders of all such equally ranking stock shall be pro rata in accordance with the respective aggregate liquidating distributions to which they would otherwise be entitled.
(c) Merger, Consolidation and Sale of Assets Not Liquidation. For purposes of this Section 5, the sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the property and assets of the Company shall not be deemed a voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, nor shall the merger, consolidation or any other business combination transaction of the Company into or with any other corporation or Person or the merger, consolidation or any other business combination transaction of any other corporation or Person into or with the Company be deemed to be a voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company.
Section 6. Redemption.
(a) Optional Redemption. The Company, at the option of its Board of Directors or any duly authorized committee thereof, may redeem out of funds legally available therefor, (i) in whole or in part, from time to time, the shares of Series U Preferred Stock at the time outstanding, on September 12, 2024 and on any dividend period end date on or after December 12, 2024, or (ii) in whole but not in part at any time within 90 days following a Regulatory Capital Event, in each case at a redemption price equal to $25,000 per share plus any declared and unpaid dividends, without accumulation of any undeclared dividends, to, but excluding, the redemption date, upon notice given as provided in Section 6(b) below.
(b) Notice of Redemption. Notice of every redemption of shares of Series U Preferred Stock shall be mailed by first class mail, postage prepaid, addressed to the Holders of such shares to be redeemed at their respective last addresses appearing on the stock register of the Company. Such mailing shall be at least 15 days and not more than 60 days before the date fixed for redemption. Any notice mailed as provided in this Section 6(b) shall be conclusively presumed to have been duly given, whether or not the Holder receives such notice, but failure duly to give such notice by mail, or any defect in such notice or in the mailing thereof, to any Holder of shares of Series U Preferred Stock designated for redemption shall not affect the validity of the proceedings for the redemption of any other shares of Series U Preferred Stock. Each notice shall state:
(i) the redemption date;
(ii) the total number of shares of Series U Preferred Stock to be redeemed and, if fewer than all the shares of a Holder are to be redeemed, the number of such shares to be redeemed;
(iii) the redemption price;
(iv) the place or places where the certificates for such shares are to be surrendered for payment of the redemption price, if applicable; and
(v) that dividends on the shares to be redeemed will cease to accrue on the redemption date.
Notwithstanding the foregoing, if the certificates evidencing the shares of Series U Preferred Stock are held of record by a depositary and any related depository shares are held of record by a Depositary or its nominee, the Company may give such notice in any manner permitted by the Depositary.
(c) Partial Redemption. In case of any redemption of only part of the shares of Series U Preferred Stock at the time outstanding, the shares of Series U Preferred Stock to be redeemed shall be selected (i) pro rata from the Holders in proportion to the number of shares of Series U Preferred Stock held by such Holders, (ii) by lot or (iii) in such other manner as the Board of Directors or any duly authorized committee thereof may determine, in its sole discretion, to be fair and equitable. Subject to the provisions of this Section 6, the Board of Directors or any duly authorized committee thereof shall have full power and authority to prescribe the terms and conditions upon which shares of Series U Preferred Stock shall be redeemed from time to time.
(d) Effectiveness of Redemption. If notice of redemption has been duly given and if on or before the redemption date specified in the notice all funds necessary for the redemption have been set aside by the Company, separate and apart from its other assets, for the pro rata benefit of the Holders of the shares called for redemption, so as to be and continue to be available therefor, or deposited by the Company with a bank or trust company selected by the Board of Directors or any duly authorized committee thereof (the “Trust”) in trust for the pro rata benefit of the Holders of the shares called for redemption, then, notwithstanding that any certificate for any share so called for redemption has not been surrendered for cancellation, on and after the redemption date all shares so called for redemption shall cease to be outstanding, all dividends with respect to such shares shall cease to accrue on such redemption date, and all rights with respect to such shares shall forthwith on such redemption date cease and terminate, except only the right of the Holders thereof to receive the amount payable on such redemption from the Trust at any time after the redemption date from the funds so deposited, without interest. The Company shall be entitled to receive, from time to time, from the Trust any interest accrued on such funds, and the Holders of any shares called for redemption shall have no claim to any such interest. Any funds so deposited and unclaimed at the end of three years from the redemption date shall, to the extent permitted by law, be released or repaid to the Company, and in the event of such repayment to the Company, the Holders of the shares so called for redemption shall be deemed to be unsecured creditors of the Company for an amount equivalent to the amount deposited as stated above for the redemption of such shares and so repaid to the Company, but shall in no event be entitled to any interest.
Section 7. Voting Rights.
(a) General. The Holders shall not be entitled to vote on any matter except as set forth in Section 7(b) below or as required by the Delaware General Corporation Law.
(b) Special Voting Right.
(i) Voting Right. If and whenever dividends on the Series U Preferred Stock or any other class or series of preferred stock that ranks on parity with the Series U Preferred Stock as to payment of dividends and upon which voting rights equivalent to those granted by this Section 7(b)(i) have been conferred and are exercisable (any such class or series being referred to herein as “dividend parity stock”) have not been declared and paid in an aggregate amount equal, as to any class or series, to at least three semi-annual or six quarterly dividend periods, as applicable, (whether consecutive or not) (a “Nonpayment”), the authorized number of directors constituting the Board of Directors shall be increased by two, and the Holders, together with holders of dividend parity stock, shall have the right, voting separately as a single class without regard to class or series (and with voting rights allocated pro rata based on the liquidation preference of each such class or series), to the exclusion of the holders of Common Stock, to elect two directors of the Company to fill such newly created directorships (and to fill any vacancies in the terms of such directorships), provided that it shall be a qualification for election of any such director that the election of such director shall not cause the Company to violate the corporate governance requirements of the New York Stock Exchange (or other exchange on which the Company’s securities may be listed) that listed companies must have a majority of independent directors and further provided that the Board of Directors shall at no time include more than two such directors. Each such director elected by the Holders together with holders of dividend parity stock is a “Preferred Stock Director.”
(ii) Election. The election of the Preferred Stock Directors will take place at any annual meeting of stockholders or any special meeting of the Holders and any dividend parity stock, called as provided herein. At any time after the special voting power has vested pursuant to Section 7(b)(i) above, the secretary of the Company may, and upon the written request (addressed to the secretary at the Company’s principal office) of the holders of at least 20% of the voting power of the Series U Preferred Stock or the holders of at least 20% of the voting power of any series of dividend parity stock then outstanding (with such voting power measured based on the voting power to elect Preferred Stock Directors), must (unless such request is received less than 90 days before the date fixed for the next annual or special meeting of the stockholders of the Company, in which event such election shall be held at such next annual or special meeting of stockholders), call a special meeting of the holders of Series U Preferred Stock and any dividend parity stock for the purposes of electing Preferred Stock Directors. The Preferred Stock Directors shall each be entitled to one vote per director on any matter.
(iii) Notice of Special Meeting. Notice for a special meeting to elect Preferred Stock Directors will be given in a similar manner to that provided in the Company’s by-laws for a special meeting of the stockholders. If the secretary of the Company does not
call a special meeting within 20 days after receipt of any such request, then any Holder may (at the expense of the Company) call such meeting, upon notice as provided in this Section 7(b)(iii), and for that purpose will have access to the stock register of the Company. The Preferred Stock Directors elected at any such special meeting and each Preferred Stock Director elected at a subsequent annual or special meeting of stockholders, will be elected for term expiring upon the earlier of the Preferred Stock Director Termination Date and the next annual meeting of stockholders following such Preferred Stock Director's election. In case any vacancy in the office of a Preferred Stock Director occurs (other than prior to the initial election of the Preferred Stock Directors), the vacancy may be filled by the Preferred Stock Director remaining in office, or if none remains in office, by a plurality of the votes cast by the holders of Series U Preferred Stock and any dividend parity stock, voting together as a single class, and the Preferred Stock Director so appointed or elected to fill such vacancy shall serve for a term expiring at the next annual meeting of the stockholders. Preferred Stock Directors may only be elected by the holders of Series U Preferred Stock and dividend parity stock in accordance with this Section 7. If the holders of Series U Preferred Stock and such dividend parity stock fail to elect a sufficient number of directors to fill all directorships for which they are entitled to elect directors pursuant to this Section 7, then any directorship not so filled shall remain vacant until such time as the holders of Series U Preferred Stock and such dividend parity stock elect a person to fill such directorship in accordance with this Section 7, or such vacancy is otherwise filled in accordance with this Section 7; and no such directorship may be filled by stockholders of the Corporation other than in accordance with this Section 7.
(iv) Termination; Removal. Whenever the Company has paid noncumulative dividends in full for at least two consecutive semi-annual or four consecutive quarterly dividend periods following a Nonpayment on the Series U Preferred Stock and on any dividend parity stock entitled to noncumulative dividends and has paid cumulative dividends in full on any dividend parity stock entitled to cumulative dividends, then the right of the Holders to elect the Preferred Stock Directors will cease (but subject always to the same provisions for the vesting of the special voting rights in the case of any similar non-payment of dividends in respect of future dividend periods) (the time of such cessation, the “Preferred Stock Director Termination Date”). Upon a Preferred Stock Director Termination Date, the terms of office of the Preferred Stock Directors will immediately terminate, the persons then serving as Preferred Stock Directors shall immediately cease to be qualified to hold office as Preferred Stock Directors, the Preferred Stock Directors shall cease to be directors of the Company and the number of directors constituting the Board of Directors shall be automatically reduced, without any action by the Board of Directors or the stockholders of the Company, by the number of Preferred Stock Directors authorized immediately prior to such termination. Any Preferred Stock Director may be removed at any time without cause by the holders of a majority of the voting power of outstanding shares of the capital stock then entitled to vote in the election of Preferred Stock Directors, voting together as a single class (with such voting power measured based on the voting power to elect Preferred Stock Directors).
(c) Senior Issuances; Adverse Changes. So long as any shares of Series U Preferred Stock are outstanding, but subject to the final paragraph of this Section 7(c), in addition to any other vote or consent of holders of the Company’s capital stock required by Delaware law, the vote or consent of the holders of at least two-thirds of the voting power of the Series U Preferred Stock and the holders of any other preferred stock entitled to vote thereon, voting together as a single class, given in person or by proxy at an annual or special meeting of stockholders, or given in writing without a meeting, will be necessary for effecting or validating any of the following actions, whether or not such approval is required by Delaware law:
(i) any amendment, alteration or repeal of any provision of the Company’s certificate of incorporation (including the certificate of designations creating the Series U Preferred Stock) or the Company’s by-laws that would alter or change the voting powers, preferences, economic rights or special rights of the Series U Preferred Stock so as to affect them adversely;
(ii) any amendment or alteration of the Company’s certificate of incorporation to authorize or create, or increase the authorized amount of, any shares of, or any securities convertible into shares of, any class or series of the Company's capital stock ranking prior to the Series U Preferred Stock in the payment of dividends or in the distribution of assets on any liquidation, dissolution, or winding up of the Company; or
(iii) the consummation of a binding share exchange or reclassification involving the Series U Preferred Stock or a merger or consolidation of the Company with another entity, except that holders of Series U Preferred Stock will have no right to vote under this provision or otherwise under Delaware law if in each case (i) the Series U Preferred Stock remains outstanding or, in the case of any such merger or consolidation with respect to which the Company is not the surviving or resulting entity, is converted into or exchanged for preferred securities of the surviving or resulting entity or its ultimate parent, that is an entity organized and existing under the laws of the United States of America, any state thereof or the District of Columbia and that is a corporation for U.S. federal income tax purposes (or if such entity is not a corporation, the Company having received an opinion of nationally recognized counsel experienced in such matters to the effect that Holders will be subject to tax for U.S. federal income tax purposes with respect to such new preferred securities after such merger or consolidation in the same amount, at the same time and otherwise in the same manner as would have been the case under the Series U Preferred Stock prior to such merger or consolidation), and (ii) such Series U Preferred Stock remaining outstanding or such preferred securities, as the case may be, have such rights, preferences, privileges and voting powers, taken as a whole, as are not materially less favorable to the holders thereof than the rights, preferences, privileges and voting powers of the Series U Preferred Stock, taken as a whole;
provided, however, that, for the avoidance of doubt, any increase in the amount of the authorized or issued Series U Preferred Stock or authorized preferred stock or any securities convertible into preferred stock or the creation and issuance, or an increase in the authorized or issued amount, of other series of preferred stock or any securities convertible into preferred stock ranking equally with and/or junior to the Series U
Preferred Stock with respect to the payment of dividends (whether such dividends are cumulative or noncumulative) and/or the distribution of assets upon the Company’s liquidation, dissolution or winding up will not be deemed to adversely affect the voting powers, preferences or special rights of the Series U Preferred Stock, and no stockholder will have the right to vote on such an increase, creation or issuance by reason of this Section 7.
If any amendment, alteration, repeal, share exchange, reclassification, merger or consolidation specified in this Section 7(c) would adversely affect one or more but not all series of preferred stock of the Company, then only such series of preferred stock as are adversely affected by and entitled to vote on the matter shall vote on the matter together with the Series U Preferred Stock as a single class (in lieu of all other series of preferred stock) for purposes of the vote or consent required by this Section 7(c).
(d) No Vote if Redemption. No vote or consent of the Holders shall be required pursuant to Section 7(b) or 7(c) if, at or prior to the time when the act with respect to such vote or consent would otherwise be required shall be effected, the Company shall have redeemed or shall have called for redemption all outstanding shares of Series U Preferred Stock, with proper notice and sufficient funds having been set aside for such redemption, in each case pursuant to Section 6 above.
Section 8. Preemption and Conversion Rights.
The Holders shall not have any preemptive rights or conversion rights as a result of the terms hereof.
Section 9. Rank.
For the avoidance of doubt, the Board of Directors or any duly authorized committee thereof may, without the vote of the Holders, authorize and issue additional shares of Junior Stock or shares of any class or series of stock of the Company now existing or hereafter authorized that ranks equally with the Series U Preferred Stock in the payment of dividends or in the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the Company.
Section 10. Reacquired Shares.
The Board of Directors shall take such actions as are necessary to cause the shares of Series U Preferred Stock which have been redeemed or otherwise purchased or acquired by the Company to be retired and restored to the status of authorized but unissued shares of preferred stock without designation as to series.
Section 11. No Sinking Fund.
Shares of Series U Preferred Stock are not subject to the operation of a sinking fund.
Section 12. Transfer Agent, Calculation Agent, Registrar and Paying Agent.
The duly appointed Transfer Agent, Registrar and paying agent for the Series U Preferred Stock shall be Computershare Trust Company, N.A. The duly appointed Calculation Agent for the Series U Preferred Stock shall be Citibank, N.A., London branch. The Company may, in its sole discretion, remove the Transfer Agent and/or the Calculation Agent in accordance with the respective agreements between the Company and the Transfer Agent and the Company and the Calculation Agent; provided, however, that the Company shall appoint a successor transfer agent and/or calculation agent who shall accept such appointment prior to the effectiveness of such removal. Upon any such removal or appointment, the Company shall send notice thereof by first-class mail, postage prepaid, to the Holders.
Section 13. Replacement Certificates for Mutilated, Destroyed, Stolen and Lost Certificates.
If physical certificates are issued, the Company shall replace any mutilated certificate at the Holder’s expense upon surrender of that certificate to the Transfer Agent. The Company shall replace certificates that become destroyed, stolen or lost at the Holder’s expense upon delivery to the Company and the Transfer Agent of satisfactory evidence that the certificate has been destroyed, stolen or lost, together with any indemnity that may be required by the Transfer Agent and the Company.
Section 14. Form.
(a) Series U Preferred Stock Certificates. Series U Preferred Stock shall be issued in certificated form in substantially the form attached hereto as Exhibit A (each, a “Series U Preferred Stock Certificate”). Exhibit A is hereby incorporated in and expressly made a part of this Certificate of Designations. The Series U Preferred Stock Certificates may have notations, legends or endorsements required by law, stock exchange rules, agreements to which the Company is subject, if any, or usage (provided that any such notation, legend or endorsement is in a form acceptable to the Company).
(b) Signature. Two Officers shall sign any Series U Preferred Stock Certificate for the Company, in accordance with the Company’s by-laws and applicable law, by manual or facsimile signature. If an Officer whose signature is on a Series U Preferred Stock Certificate no longer holds that office at the time the Transfer Agent countersigned the Series U Preferred Stock Certificate, such Series U Preferred Stock Certificate shall be valid nevertheless. A Series U Preferred Stock Certificate shall not be valid until an authorized signatory of the Transfer Agent manually countersigns such Series U Preferred Stock Certificate. Each Series U Preferred Stock Certificate shall be dated the date of its countersignature.
Section 15. Taxes.
(a) Transfer Taxes. The Company shall pay any and all stock transfer, documentary, stamp and similar taxes that may be payable in respect of any issuance or delivery of shares of Series U Preferred Stock. The Company shall not, however, be required to pay any such tax that may be payable in respect of any transfer involved in the issuance or delivery of shares of Series U Preferred Stock, in a name other than that in which the shares of Series U Preferred Stock were registered, or in respect of any payment to any Person other than a payment to the registered holder thereof, and shall not be required to make any such issuance, delivery or payment unless and until the Person otherwise entitled to such issuance, delivery or payment has paid to the Company the amount of any such tax or has established, to the satisfaction of the Company, that such tax has been paid or is not payable.
(b) Withholding. All payments and distributions (or deemed distributions) on the shares of Series U Preferred Stock shall be subject to withholding and backup withholding of tax to the extent required by law, subject to applicable exemptions, and amounts withheld, if any, shall be treated as received by Holders.
Section 16. Notices.
All notices referred to herein shall be in writing, and, unless otherwise specified herein, all notices hereunder shall be deemed to have been given upon the earlier of receipt thereof or three business days after the mailing thereof if sent by registered or certified mail (unless first class mail shall be specifically permitted for such notice under the terms of this Certificate of Designations) with postage prepaid, addressed: (i) if to the Company, to its office at 388 Greenwich Street, New York, New York 10013 (Attention: Corporate Secretary) or to the Transfer Agent at its office at 150 Royall Street, Canton, Massachusetts 02021, or other agent of the Company designated as permitted by this Certificate of Designations, or (ii) if to any Holder, to such Holder at the address of such Holder as listed in the stock record books of the Company (which may include the records of the Transfer Agent) or (iii) to such other address as the Company or any such Holder, as the case may be, shall have designated by notice similarly given.
Section 17. Other Rights Disclaimed.
The shares of Series U Preferred Stock have no voting powers, preferences or relative, participating, optional or other special rights, or qualifications, limitations or restrictions thereof, other than as set forth herein or in the Certificate of Incorporation of the Company.
IN WITNESS WHEREOF, this Certificate of Designations has been executed on behalf of the Company by its Treasurer this 11th day of September, 2019.
CITIGROUP INC.
By: /s/ Michael Verdeschi_______________________________
Name: Michael Verdeschi
Title: Treasurer
Exhibit A
FORM OF
5.000% FIXED RATE / FLOATING RATE NONCUMULATIVE PREFERRED STOCK, SERIES U
Certificate Number_______ Number of Shares of Series U Preferred Stock______
CUSIP NO.:
CITIGROUP INC.
5.000% Fixed Rate / Floating Rate Noncumulative Preferred Stock, Series U
(par value $1.00 per share)
(liquidation preference $25,000 per share)
Citigroup Inc., a Delaware corporation (the “Company”), hereby certifies that [ ] (the “Holder”) is the registered owner of [ ] fully paid and non-assessable shares of the Company’s designated 5.000% Fixed Rate / Floating Rate Noncumulative Preferred Stock, Series U, with a par value of $1.00 per share and a liquidation preference of $25,000 per share (the “Series U Preferred Stock”). The shares of Series U Preferred Stock are transferable on the books and records of the Registrar, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer. The designations, rights, privileges, restrictions, preferences and other terms and provisions of the Series U Preferred Stock represented hereby are and shall in all respects be subject to the provisions of the Certificate of Designations dated September 11, 2019 as the same may be amended from time to time (the “Certificate of Designations”). Capitalized terms used herein but not defined shall have the meaning given them in the Certificate of Designations. The Company will provide a copy of the Certificate of Designations to a Holder without charge upon written request to the Company at its principal place of business.
Reference is hereby made to select provisions of the Series U Preferred Stock set forth on the reverse hereof, and to the Certificate of Designations, which select provisions and the Certificate of Designations shall for all purposes have the same effect as if set forth at this place.
Upon receipt of this certificate, the Holder is bound by the Certificate of Designations and is entitled to the benefits thereunder.
Unless the Registrar has properly countersigned, these shares of Series U Preferred Stock shall not be entitled to any benefit under the Certificate of Designations or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, this certificate has been executed on behalf of the Company by its [Title] and by its [Title] this __ day of _______, ________.
CITIGROUP INC.
By: _______________________________________
Name:
Title:
By: _______________________________________
Name:
Title:
REGISTRAR’S COUNTERSIGNATURE
These are shares of Series U Preferred Stock referred to in the within-mentioned Certificate of Designations.
Dated:
COMPUTERSHARE TRUST COMPANY, N.A., as Registrar
By: _______________________________________
Name:
Title:
REVERSE OF CERTIFICATE
Dividends on each share of Series U Preferred Stock shall be payable at the rate provided in the Certificate of Designations.
The shares of Series U Preferred Stock shall be redeemable at the option of the Company in the manner and in accordance with the terms set forth in the Certificate of Designations.
The Company shall furnish without charge to each holder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class or Series of share capital issued by the Company and the qualifications, limitations or restrictions of such preferences and/or rights.
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers the shares of Series U Preferred Stock evidenced hereby to:
___________________________________________________
___________________________________________________
(Insert assignee’s social security or taxpayer identification number, if any)
___________________________________________________
___________________________________________________
(Insert address and zip code of assignee)
and irrevocably appoints:
___________________________________________________
___________________________________________________
as agent to transfer the shares of Series U Preferred Stock evidenced hereby on the books of the Transfer Agent. The agent may substitute another to act for him or her.
Date:
Signature:
___________________________________________________
(Sign exactly as your name appears on the other side of this Certificate)
Signature Guarantee: ___________________________________________________
(Signature must be guaranteed by an “eligible guarantor institution” that is a bank, stockbroker, savings and loan association or credit union meeting the requirements of the Transfer Agent, which requirements include membership or participation in the Securities Transfer Agents Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Transfer Agent in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.)
CERTIFICATE OF RETIREMENT
OF PREFERRED STOCK
OF CITIGROUP INC.
(Pursuant to Section 243 of the General
Corporation Law of the State of Delaware)
CITIGROUP INC., a corporation duly organized and existing under the General Corporation Law of the State of Delaware, certifies as follows:
FIRST: Citigroup's Restated Certificate of Incorporation, as amended (the "Certificate of Incorporation"), authorizes the issuance of 60,000 shares of 5.800% Fixed Rate / Floating Rate Non-Cumulative Preferred Stock, Series N (the "Preferred Stock, Series N"), each such share with $1.00 par value and a stated value of $25,000 per share.
SECOND: Citigroup has retired all of the authorized shares of the Preferred Stock, Series N.
THIRD: Pursuant to the provisions of Section 243 of the General Corporation Law of the State of Delaware, the shares that were designated to Preferred Stock, Series N are hereby returned to the status of authorized but unissued shares of the Preferred Stock of Citigroup Inc.
IN WITNESS WHEREOF, CITIGROUP INC. has caused this certificate to be signed by the below duly authorized Assistant Treasurer this 19th day of November, 2019.
CITIGROUP INC.
By: /s/ Elissa Steinberg________________
Elissa Steinberg
Assistant Treasurer
CERTIFICATE OF DESIGNATIONS
OF
4.700% FIXED RATE / FLOATING RATE NONCUMULATIVE PREFERRED STOCK SERIES V
OF
CITIGROUP INC.
______________________________
pursuant to Section 151 of the
General Corporation Law of the State of Delaware
______________________________
Citigroup Inc., a Delaware corporation (the “Company”), hereby certifies that:
1. The Restated Certificate of Incorporation of the Company (as amended through the date hereof, the “Certificate of Incorporation”) fixes the total number of shares of all classes of capital stock that the Company shall have the authority to issue at six billion (6,000,000,000) shares of common stock, par value $0.01 per share, and thirty million (30,000,000) shares of preferred stock, par value $1.00 per share.
2. The Certificate of Incorporation expressly grants to the Board of Directors of the Company (the “Board of Directors”) authority to provide for the issuance of the shares of preferred stock in series, and to establish from time to time the number of shares to be included in each such series and to fix the designation, powers, preferences and rights of the shares of each such series and the qualifications, limitations or restrictions thereof.
3. Pursuant to the authority conferred upon a preferred stock committee (the “Preferred Stock Committee”) by the Board of Directors, the Preferred Stock Committee, by action duly taken on January 15, 2020, adopted resolutions (i) authorizing the issuance and sale of up to 60,000 shares of the Company’s preferred stock and (ii) approving this final form of Certificate of Designations of 4.700% Fixed Rate / Floating Rate Noncumulative Preferred Stock, Series V (the “Series V Preferred Stock”), establishing the number of shares to be included in this Series V Preferred Stock and fixing the designation, powers, preferences and rights of the shares of this Series V Preferred Stock and the qualifications, limitations or restrictions thereof as follows:
Section 1. Designation.
The designation of the Series of preferred stock shall be “4.700% Fixed Rate / Floating Rate Noncumulative Preferred Stock, Series V” (the “Series V Preferred Stock”). Each share of Series V Preferred Stock shall be identical in all respects to every other share of Series V Preferred Stock.
Section 2. Number of Shares.
The number of authorized shares of Series V Preferred Stock shall be 60,000. That number from time to time may be increased (but not in excess of the total number of authorized shares of preferred stock) or decreased (but not below the number of shares of Series V Preferred Stock then outstanding) by further resolution duly adopted by the Board of Directors, the Preferred Stock Committee or any other duly authorized committee thereof and by the filing of a certificate pursuant to the provisions of the General Corporation Law of the State of Delaware stating that such increase or reduction, as the case may be, has been so authorized. The Company shall have the authority to issue fractional shares of Series V Preferred Stock.
Section 3. Definitions. As used herein with respect to Series V Preferred Stock:
“Accrued Dividend Compounding Factor” shall have the meaning set forth in Section 4(a) hereof.
“Appropriate Federal Banking Agency” means the “appropriate Federal banking agency” with respect to the Company as that term is defined in Section 3(q) of the Federal Deposit Insurance Act of 1950, as amended, or any successor provision.
“Benchmark” shall have the meaning set forth in Section 4(a) hereof.
“Benchmark Replacement” shall have the meaning set forth in Section 4(a) hereof.
“Benchmark Replacement Adjustment” shall have the meaning set forth in Section 4(a) hereof.
“Benchmark Replacement Conforming Changes” shall have the meaning set forth in Section 4(a) hereof.
“Benchmark Replacement Date” shall have the meaning set forth in Section 4(a) hereof.
“Benchmark Transition Event” shall have the meaning set forth in Section 4(a) hereof.
“Board of Directors” has the meaning set forth in the recitals above.
“business day”, including with respect to the Fixed Rate Period, means any weekday that is not a legal holiday in New York City and is not a day on which banking institutions in New York City are authorized or required by law or regulation to be closed.
“Business Day” with respect to the Floating Rate Period means any weekday that is not a legal holiday in New York City and is not a day on which banking institutions in New York City
are authorized or required by law or regulation to be closed and a U.S. Government Securities Business Day.
“Calculation Agent” means Citibank, N.A., London branch, and its successors and assigns.
“Common Stock” means the common stock of the Company, par value $0.01 per share, or any other shares of the capital stock of the Company into which such shares of common stock shall be reclassified or changed.
“Corresponding Tenor” shall have the meaning set forth in Section 4(a) hereof.
“Depositary” means DTC or its nominee or any successor depositary appointed by the Company.
“dividend payment date” shall have the meaning set forth in Section 4(a) hereof.
“dividend period” shall have the meaning set forth in Section 4(a) hereof.
“dividend period end date” shall have the meaning set forth in Section 4(a) hereof.
“Dividend Record Date” shall have the meaning set forth in Section 4(a) hereof.
“DTC” means The Depository Trust Company.
“Fixed Rate Period” shall have the meaning set forth in Section 4(a) hereof.
“Floating Rate Period” shall have the meaning set forth in Section 4(a) hereof.
“Holder” means the Person in whose name the shares of the Series V Preferred Stock are registered, which may be treated by the Company, Calculation Agent, Transfer Agent, Registrar and paying agent as the absolute owner of the shares of Series V Preferred Stock for the purpose of making payment and for all other purposes.
“ISDA” shall have the meaning set forth in Section 4(a) hereof.
“ISDA Definitions” shall have the meaning set forth in Section 4(a) hereof.
“ISDA Fallback Adjustment” shall have the meaning set forth in Section 4(a) hereof.
“ISDA Fallback Rate” shall have the meaning set forth in Section 4(a) hereof.
“Junior Stock” means the Common Stock and any other class or Series of stock of the
Company now existing or hereafter authorized over which Series V Preferred Stock has
preference or priority in the payment of dividends or in the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the Company.
“Nonpayment” shall have the meaning set forth in Section 7(b)(i) hereof.
“NY Federal Reserve’s website” shall have the meaning set forth in Section 4(a) hereof.
“Officer” means the Chief Executive Officer, the Chairman, the Chief Administrative Officer, any Vice Chairman, the Chief Financial Officer, the Controller, the Chief Accounting
Officer, the Treasurer, any Deputy Treasurer, any Assistant Treasurer, any Vice President, the General Counsel and Corporate Secretary and any Assistant Secretary of the Company.
“Person” means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint-stock company, limited liability company, trust, or other entity.
“Preferred Stock Director” shall have the meaning set forth in Section 7(b)(i) hereof.
“Preferred Stock Director Termination Date” shall have the meaning set forth in Section 7(b)(iv) hereof.
“Rate Cut-Off Date” shall have the meaning set forth in Section 4(a) hereof.
“Reference Time” shall have the meaning set forth in Section 4(a) hereof.
“Registrar” means the Transfer Agent acting in its capacity as registrar for the Series V Preferred Stock, and its successors and assigns.
“Regulatory Capital Event” means the good faith determination by the Company that, as a result of (i) any amendment to, clarification of, or change in, the laws or regulations of the United States (including, for the avoidance of doubt, any agency or instrumentality of the United States, including the Federal Reserve and other federal bank regulatory agencies) or any political subdivision of or in the United States that is enacted or becomes effective after the initial issuance of any share of the Series V Preferred Stock, (ii) any proposed change in those laws or regulations that is announced or becomes effective after the initial issuance of any share of the Series V Preferred Stock, or (iii) any official administrative decision or judicial decision or administrative action or other official pronouncement interpreting or applying those laws or regulations or policies with respect thereto that is announced after the initial issuance of any share of the Series V Preferred Stock, there is more than an insubstantial risk that the Company will not be entitled to treat the full liquidation preference amount of $25,000 per share of the Series V Preferred Stock then outstanding as “tier 1 capital” (or its equivalent) for purposes of the capital adequacy guidelines of the Federal Reserve (or, as and if applicable, the capital adequacy guidelines or regulations of any successor Appropriate Federal Banking Agency) as then in effect and applicable, for so long as any share of the Series V Preferred Stock is outstanding.
“Relevant Governmental Body” shall have the meaning set forth in Section 4(a) hereof.
“Series V Liquidation Preference” shall have the meaning set forth in Section 5(a) hereof.
“Series V Preferred Stock” shall have the meaning set forth in Section 1 hereof.
“Series V Preferred Stock Certificate” shall have the meaning set forth in Section 14(a) hereof.
“SOFR” shall have the meaning set forth in Section 4(a) hereof.
“Transfer Agent” means Computershare Trust Company, N.A., a federally chartered national association, acting as Transfer Agent, Registrar and paying agent for the Series V Preferred Stock, and its successors and assigns.
“Trust” shall have the meaning set forth in Section 6(d).
“Unadjusted Benchmark Replacement” shall have the meaning set forth in Section 4(a) hereof.
“U.S. Government Securities Business Day” shall have the meaning set forth in Section 4(a) hereof.
Section 4. Dividends.
(a)Rate. Holders shall be entitled to receive, when, as and if declared by the Board of Directors or any duly authorized committee thereof, but only out of funds legally available therefor, noncumulative cash dividends on each share of Series V Preferred Stock in the amounts specified below in this Section 4, and no more, payable (i) semiannually in arrears on each January 30 and July 30, beginning July 30, 2020, from, and including, the date of issuance to, but excluding, January 30, 2025 (the “Fixed Rate Period”); provided, however, if any such day is not a business day, then payment of any dividend otherwise payable on that date will be made on the next succeeding day that is a business day, without any additional dividend accrual or other payment in respect of such postponement, and (ii) quarterly in arrears on the second Business Day following each dividend period end date, beginning on May 2, 2025, from, and including, January 30, 2025 (the “Floating Rate Period”) (each date for payment of dividends, a “dividend payment date”). A “dividend period end date” means the 30th of each January, April, July and October, beginning April 30, 2025; provided, however, that if any dividend period end date (other than a redemption date) is not a Business Day, then such date will be postponed to the next succeeding Business Day, unless that day falls in the next calendar month, in which case the dividend period end date will be the immediately preceding Business Day. During the Fixed Rate Period, “dividend period” means the period from, and including, each dividend payment date to, but excluding, the next succeeding dividend payment date, except for the initial dividend period, which will be the period from, and including, the date of issuance of the Preferred Stock to, but excluding, the first dividend payment date. During the Floating Rate Period, “dividend period” means the period from, and including, each dividend period end date (except for the initial dividend period in the Floating Rate Period, “dividend period” means the period from, and including, January 30, 2025) to, but excluding, the next succeeding dividend period end date; provided that the dividend period following an election by the Company to redeem the Preferred Stock (as described in Section 6(a)) will be the period from, and including, the immediately preceding dividend period end date to, but excluding, the redemption date; and provided further that SOFR (as defined below) for each calendar day from, and including, the Rate Cut-Off Date to, but excluding, the redemption date will equal SOFR in respect of the Rate Cut-Off Date. The Rate Cut-Off Date will be the second U.S. Government Securities Business Day prior to a redemption date.
Dividends on each share of Series V Preferred Stock will accrue on the liquidation preference of $25,000 per share at a rate per annum equal to (i) 4.700%, for each dividend period in the Fixed Rate Period and (ii) SOFR (compounding daily over each dividend period as described below) plus 3.234%, for each dividend period in the
Floating Rate Period, provided that in no event will the dividend payable on the Preferred Stock be less than zero. The record date for payment of dividends on the Series V Preferred Stock will be the record date fixed by the Board of Directors or any other duly authorized committee thereof that is not more than 30 nor less than 10 days prior to such dividend payment date (each, a “Dividend Record Date”). Any such day that is a Dividend Record Date will be a Dividend Record Date whether or not such day is a business day. The amount of dividends payable during the Fixed Rate Period will be computed on the basis of a 360-day year of twelve 30-day months. The amount of dividends payable during the Floating Rate Period will be computed on the basis of a 360-day year and the actual number of days elapsed.
For the purposes of calculating any dividend with respect to any dividend period during the Floating Rate Period:
“Accrued Dividend Compounding Factor” means the result of the following formula:
where
“do”, for any dividend period, is the number of U.S. Government Securities Business Days in the relevant dividend period.
“i” is a series of whole numbers from one to d0, each representing the relevant U.S. Government Securities Business Day in chronological order from, and including, the first U.S. Government Securities Business Day in the relevant dividend period.
“SOFRi”, for any day “i” in the relevant dividend period, is a reference rate equal to SOFR in respect of that day.
“ni”, for any day “i” in the relevant dividend period, is the number of calendar days from, and including, such U.S. Government Securities Business Day “i” to, but excluding, the following U.S. Government Securities Business Day.
“d” is the number of calendar days in the relevant dividend period.
“U.S. Government Securities Business Day” means any day except for a Saturday, Sunday or a day on which the Securities Industry and Financial Markets Association (SIFMA) recommends that the fixed income departments of its members be closed for the entire day for purposes of trading in U.S. government securities.
“SOFR,” with respect to any day, means the rate determined by the Calculation Agent in accordance with the following provisions:
(1)the Secured Overnight Financing Rate for trades made on such day that appears at approximately 3:00 p.m. (New York City time) on the NY Federal Reserve’s website on the U.S. Government Securities Business Day immediately following such U.S. Government Securities Business Day; or
(2)if the rate specified in (1) above does not so appear, unless a Benchmark Transition Event and its related Benchmark Replacement Date have occurred as described in (3) below, the Secured Overnight Financing Rate published on the NY Federal Reserve’s website for the first preceding U.S. Government Securities Business Day for which the Secured Overnight Financing Rate was published on the NY Federal Reserve’s
website; or
(3)if a Benchmark Transition Event and its related Benchmark Replacement Date have
occurred prior to the relevant dividend period end date, the Calculation Agent will use the Benchmark Replacement to determine the rate and for all other purposes relating to the Preferred Stock.
In connection with the SOFR definition above, the following definitions apply:
“Benchmark” means, initially, SOFR; provided that if a Benchmark Transition Event and its related Benchmark Replacement Date have occurred with respect to SOFR or the then-current Benchmark, then “Benchmark” means the applicable Benchmark Replacement.
“Benchmark Replacement” means the first alternative set forth in the order below that can be determined by the Company (or one of its affiliates) as of the Benchmark Replacement Date:
(1)the sum of: (a) the alternate rate that has been selected or recommended by
the Relevant Governmental Body as the replacement for the then-current Benchmark for the applicable Corresponding Tenor and (b) the Benchmark Replacement Adjustment;
(2)the sum of: (a) the ISDA Fallback Rate and (b) the Benchmark Replacement
Adjustment; or
(3)the sum of: (a) the alternate rate that has been selected by the Company (or one of its affiliates) as the replacement for the then-current Benchmark for the applicable Corresponding Tenor giving due consideration to any industry-accepted rate as a
replacement for the then-current Benchmark for U.S. dollar-denominated floating rate notes at such time and (b) the Benchmark Replacement Adjustment.
“Benchmark Replacement Adjustment” means the first alternative set forth in the order below that can be determined by the Company (or one of its affiliates) as of the Benchmark Replacement Date:
(1)the spread adjustment, or method for calculating or determining such spread
adjustment, (which may be a positive or negative value or zero) that has been selected or recommended by the Relevant Governmental Body for the applicable Unadjusted Benchmark Replacement;
(2)if the applicable Unadjusted Benchmark Replacement is equivalent to the ISDA
Fallback Rate, then the ISDA Fallback Adjustment;
(3)the spread adjustment (which may be a positive or negative value or zero) that has
been selected by the Company (or one of its affiliates) giving due consideration to any industry-accepted spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of the then-current Benchmark with the applicable Unadjusted Benchmark Replacement for U.S. dollar-denominated floating
rate notes at such time.
“Benchmark Replacement Conforming Changes” means, with respect to any Benchmark Replacement, any technical, administrative or operational changes that the Company (or one of its affiliates) decides may be appropriate to reflect the adoption of such Benchmark Replacement in a manner substantially consistent with market practice (or, if the Company (or such affiliate) decides that adoption of any portion of such market practice is not administratively feasible or if the Company (or such affiliate) determines that no market practice for use of the Benchmark Replacement exists, in such other manner as the Company (or such affiliate) determines is reasonably necessary).
“Benchmark Replacement Date” means the earliest to occur of the following events with respect to the then-current Benchmark:
(1)in the case of clause (1) or (2) of the definition of “Benchmark Transition Event,” the
later of (a) the date of the public statement or publication of information referenced therein and (b) the date on which the administrator of the Benchmark permanently or indefinitely ceases to provide the Benchmark; or
(2)in the case of clause (3) of the definition of “Benchmark Transition Event,” the date
of the public statement or publication of information referenced therein.
For the avoidance of doubt, if the event giving rise to the Benchmark Replacement Date occurs on the same day as, but earlier than, the Reference Time in respect of any determination, the Benchmark Replacement Date will be deemed to have occurred prior to the Reference Time for such determination.
“Benchmark Transition Event” means the occurrence of one or more of the following events with respect to the then-current Benchmark:
(1)a public statement or publication of information by or on behalf of the administrator
of the Benchmark announcing that such administrator has ceased or will cease to provide the Benchmark, permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide the Benchmark;
(2)a public statement or publication of information by the regulatory supervisor for the
administrator of the Benchmark, the central bank for the currency of the Benchmark, an insolvency official with jurisdiction over the administrator for the Benchmark, a resolution authority with jurisdiction over the administrator for the Benchmark or a court or an entity with similar insolvency or resolution authority over the administrator for the Benchmark, which states that the administrator of the Benchmark has ceased or will cease to provide the Benchmark permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide the Benchmark; or
(3)a public statement or publication of information by the regulatory supervisor for the
administrator of the Benchmark announcing that the Benchmark is no longer representative.
“Corresponding Tenor” with respect to a Benchmark Replacement means a tenor (including overnight) having approximately the same length (disregarding business day adjustment) as the applicable tenor for the then-current Benchmark.
“ISDA” means the International Swaps and Derivatives Association, Inc. or any successor thereto.
“ISDA Definitions” means the 2006 ISDA Definitions published by ISDA, as amended or supplemented from time to time, or any successor definitional booklet for interest rate derivatives published from time to time.
“ISDA Fallback Adjustment” means the spread adjustment (which may be a positive or negative value or zero) that would apply for derivatives transactions referencing the ISDA Definitions to be determined upon the occurrence of an index cessation event with respect to the Benchmark for the applicable tenor.
“ISDA Fallback Rate” means the rate that would apply for derivatives transactions referencing the ISDA Definitions to be effective upon the occurrence of an index cessation date with respect to the Benchmark for the applicable tenor excluding the applicable ISDA Fallback Adjustment.
“NY Federal Reserve’s website” means the website of the Federal Reserve Bank of New York (the “NY Federal Reserve”), currently at http://www.newyorkfed.org, or any successor website of the NY Federal Reserve or the website of any successor administrator of the Secured Overnight Financing Rate.
“Rate Cut-Off Date” means the second U.S. Government Securities Business Day prior to a redemption date.
“Reference Time” with respect to any determination of the Benchmark means the time determined by the Company (or one of its affiliates) in accordance with the Benchmark Replacement Conforming Changes.
“Relevant Governmental Body” means the Federal Reserve Board and/or the NY Federal Reserve, or a committee officially endorsed or convened by the Federal Reserve Board and/or the NY Federal Reserve or any successor thereto.
“Unadjusted Benchmark Replacement” means the Benchmark Replacement excluding the Benchmark Replacement Adjustment.
Any determination, decision or election that may be made by the Company (or one of its affiliates) pursuant to the provisions described above, including any determination with respect to tenor, rate or adjustment or of the occurrence or non-occurrence of an event, circumstance or date and any decision to take or refrain from taking any action or any selection, will be conclusive and binding absent manifest error, will be made in the Company’s (or such affiliate’s) sole discretion, and, notwithstanding anything to the contrary in this Certificate of Designations, shall become effective without consent from the holders of the Series V Preferred Stock or any other party.
All percentages resulting from any calculation of the dividend rate will be rounded, if necessary, to the nearest 1/100,000 of 1% (.0000001), with five one-millionths of a percentage point rounded upward. All currency amounts used in, or resulting from, the calculation on the Series V Preferred Stock will be rounded to the nearest one-hundredth of a unit. For purposes of rounding, .005 of a unit shall be rounded upward.
(b) Noncumulative Dividends. If the Board of Directors or any duly authorized committee thereof does not declare a dividend on the Series V Preferred Stock for any dividend period prior to the related dividend payment date, that dividend will not accrue, and the Company will have no obligation to pay, and Holders shall have no right to receive, a dividend for that dividend period on the related dividend payment date or at any future time, whether or not dividends on the Series V Preferred Stock or any other Series of preferred stock or common stock are declared for any subsequent period. References herein to the “accrual” of dividends refer only to the determination of the amount of such dividend and do not imply that any right to a dividend arises prior to the date on which a dividend is declared.
(c) Priority of Dividends. So long as any share of Series V Preferred Stock remains outstanding, unless as to a dividend payment date full dividends on all outstanding shares of the
Series V Preferred Stock have been declared and paid or declared and a sum sufficient for the payment of those dividends has been set aside for the dividend period then ending, the Company will not, and will cause its subsidiaries not to, during the next succeeding dividend period that commences on such dividend payment date during the Fixed Rate Period or dividend period end date during the Floating Rate Period, declare or pay any dividend on, make any distributions relating to, or redeem, purchase, acquire or make a liquidation payment relating to, any Junior Stock, or make any guarantee payment with respect thereto, other than:
(i) purchases, redemptions or other acquisitions of shares of Junior Stock in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of employees, officers, directors or consultants;
(ii) purchases of shares of Common Stock pursuant to a contractually binding requirement to buy stock existing prior to the commencement of the then-current dividend period, including under a contractually binding stock repurchase plan;
(iii) as a result of an exchange or conversion of any class or Series of Junior Stock for any other class or Series of Junior Stock;
(iv) the purchase of fractional interests in shares of Junior Stock pursuant to the conversion or exchange provisions of such Junior Stock or the security being converted or exchanged;
(v) the purchase of Junior Stock by an investment banking subsidiary of the Company in connection with the distribution thereof; or
(vi) the purchase of Junior Stock by any investment banking subsidiary of the Company in connection with market-making or other secondary market activities in the ordinary course of the business of such subsidiary.
The restrictions set forth in the preceding provisions of this Section 4(c) shall not apply to any Junior Stock dividends paid by the Company where the dividend is in the form of the same stock (or the right to buy the same stock) as that on which the dividend is being paid.
Except as provided below, for so long as any share of Series V Preferred Stock remains outstanding, if dividends are not declared and paid in full upon the shares of Series V Preferred Stock and any class or series of stock of the Company now existing or hereafter authorized that ranks equally with the Series V Preferred Stock in the payment of dividends, all dividends declared upon shares of Series V Preferred Stock and such other stock will be declared on a proportional basis so that the amount of dividends declared per share will bear to each other the same ratio that accrued dividends for the then-current dividend period per share of Series V Preferred Stock and accrued dividends for the then-current dividend period per share of such other stock (including, in the case of any such other stock that bears cumulative dividends, all accrued and unpaid dividends) bear to each other.
Subject to the foregoing, and not otherwise, such dividends payable in cash, stock or otherwise, as may be determined by the Board of Directors or any duly authorized committee
thereof, may be declared and paid on any other class or series of stock of the Company from time to time out of any funds legally available for such payment, and Holders will not be entitled to participate in those dividends.
Section 5. Liquidation Rights.
(a) Liquidation. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company, Holders shall be entitled, out of funds legally available therefor, before any distribution or payment may be made by the Company or set aside for the holders of any Junior Stock and subject to the rights of the holders of any class or series of stock ranking senior to or on parity with Series V Preferred Stock upon liquidation and the rights of the Company’s depositors and other creditors, to receive in full a liquidating distribution in the amount of the liquidation preference of $25,000 per share (the “Series V Liquidation Preference”), plus any accrued dividends thereon from the last dividend payment date to, but excluding, the date of the liquidation, dissolution or winding up if and to the extent declared but not yet paid. Holders shall not be entitled to any further payments in the event of any such voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company other than what is expressly provided for in this Section 5.
(b) Partial Payment. If the assets of the Company are not sufficient to pay in full the aforesaid liquidation distributions to the Holders and any liquidation distributions owed to holders of any class or series of stock of the Company ranking equally with the Series V Preferred Stock in the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the Company, the amounts paid to the Holders and to the holders of all such equally ranking stock shall be pro rata in accordance with the respective aggregate liquidating distributions to which they would otherwise be entitled.
(c) Merger, Consolidation and Sale of Assets Not Liquidation. For purposes of this Section 5, the sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the property and assets of the Company shall not be deemed a voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, nor shall the merger, consolidation or any other business combination transaction of the Company into or with any other corporation or Person or the merger, consolidation or any other business combination transaction of any other corporation or Person into or with the Company be deemed to be a voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company.
Section 6. Redemption.
(a) Optional Redemption. The Company, at the option of its Board of Directors or any duly authorized committee thereof, may redeem out of funds legally available therefor, (i) in whole or in part, from time to time, the shares of Series V Preferred Stock at the time outstanding, on January 30, 2025 and on any dividend period end date on or after April 30, 2025, or (ii) in whole but not in part at any time within 90 days following a Regulatory Capital Event, in each case at a redemption price equal to $25,000 per share plus any declared and unpaid dividends, without accumulation of any undeclared dividends, to, but excluding, the redemption date, upon notice given as provided in Section 6(b) below.
(b) Notice of Redemption. Notice of every redemption of shares of Series V Preferred Stock shall be mailed by first class mail, postage prepaid, addressed to the Holders of such shares to be redeemed at their respective last addresses appearing on the stock register of the Company. Such mailing shall be at least 5 days and not more than 30 days before the date fixed for redemption. Any notice mailed as provided in this Section 6(b) shall be conclusively presumed to have been duly given, whether or not the Holder receives such notice, but failure duly to give such notice by mail, or any defect in such notice or in the mailing thereof, to any Holder of shares of Series V Preferred Stock designated for redemption shall not affect the validity of the proceedings for the redemption of any other shares of Series V Preferred Stock. Each notice shall state:
(i) the redemption date;
(ii) the total number of shares of Series V Preferred Stock to be redeemed and, if fewer than all the shares of a Holder are to be redeemed, the number of such shares to be redeemed;
(iii) the redemption price;
(iv) the place or places where the certificates for such shares are to be surrendered for payment of the redemption price, if applicable; and
(v) that dividends on the shares to be redeemed will cease to accrue on the redemption date.
Notwithstanding the foregoing, if the certificates evidencing the shares of Series V Preferred Stock are held of record by a depositary and any related depository shares are held of record by a Depositary or its nominee, the Company may give such notice in any manner permitted by the Depositary.
(c) Partial Redemption. In case of any redemption of only part of the shares of Series V Preferred Stock at the time outstanding, the shares of Series V Preferred Stock to be redeemed shall be selected (i) pro rata from the Holders in proportion to the number of shares of Series V Preferred Stock held by such Holders, (ii) by lot or (iii) in such other manner as the Board of Directors or any duly authorized committee thereof may determine, in its sole discretion, to be fair and equitable. Subject to the provisions of this Section 6, the Board of Directors or any duly authorized committee thereof shall have full power and authority to prescribe the terms and conditions upon which shares of Series V Preferred Stock shall be redeemed from time to time.
(d) Effectiveness of Redemption. If notice of redemption has been duly given and if on or before the redemption date specified in the notice all funds necessary for the redemption have been set aside by the Company, separate and apart from its other assets, for the pro rata benefit of the Holders of the shares called for redemption, so as to be and continue to be available therefor, or deposited by the Company with a bank or trust company selected by the Board of Directors or any duly authorized committee thereof (the “Trust”) in trust for the pro rata benefit of the Holders of the shares called for redemption, then, notwithstanding that any certificate for any
share so called for redemption has not been surrendered for cancellation, on and after the redemption date all shares so called for redemption shall cease to be outstanding, all dividends with respect to such shares shall cease to accrue on such redemption date, and all rights with respect to such shares shall forthwith on such redemption date cease and terminate, except only the right of the Holders thereof to receive the amount payable on such redemption from the Trust at any time after the redemption date from the funds so deposited, without interest. The Company shall be entitled to receive, from time to time, from the Trust any interest accrued on such funds, and the Holders of any shares called for redemption shall have no claim to any such interest. Any funds so deposited and unclaimed at the end of three years from the redemption date shall, to the extent permitted by law, be released or repaid to the Company, and in the event of such repayment to the Company, the Holders of the shares so called for redemption shall be deemed to be unsecured creditors of the Company for an amount equivalent to the amount deposited as stated above for the redemption of such shares and so repaid to the Company, but shall in no event be entitled to any interest.
Section 7. Voting Rights.
(a) General. The Holders shall not be entitled to vote on any matter except as set forth in Section 7(b) below or as required by the Delaware General Corporation Law.
(b) Special Voting Right.
(i) Voting Right. If and whenever dividends on the Series V Preferred Stock or any other class or series of preferred stock that ranks on parity with the Series V Preferred Stock as to payment of dividends and upon which voting rights equivalent to those granted by this Section 7(b)(i) have been conferred and are exercisable (any such class or series being referred to herein as “dividend parity stock”) have not been declared and paid in an aggregate amount equal, as to any class or series, to at least three semi-annual or six quarterly dividend periods, as applicable, (whether consecutive or not) (a “Nonpayment”), the authorized number of directors constituting the Board of Directors shall be increased by two, and the Holders, together with holders of dividend parity stock, shall have the right, voting separately as a single class without regard to class or series (and with voting rights allocated pro rata based on the liquidation preference of each such class or series), to the exclusion of the holders of Common Stock, to elect two directors of the Company to fill such newly created directorships (and to fill any vacancies in the terms of such directorships), provided that it shall be a qualification for election of any such director that the election of such director shall not cause the Company to violate the corporate governance requirements of the New York Stock Exchange (or other exchange on which the Company’s securities may be listed) that listed companies must have a majority of independent directors and further provided that the Board of Directors shall at no time include more than two such directors. Each such director elected by the Holders together with holders of dividend parity stock is a “Preferred Stock Director.”
(ii) Election. The election of the Preferred Stock Directors will take place at any annual meeting of stockholders or any special meeting of the Holders and any dividend
parity stock, called as provided herein. At any time after the special voting power has vested pursuant to Section 7(b)(i) above, the secretary of the Company may, and upon the written request (addressed to the secretary at the Company’s principal office) of the holders of at least 20% of the voting power of the Series V Preferred Stock or the holders of at least 20% of the voting power of any series of dividend parity stock then outstanding (with such voting power measured based on the voting power to elect Preferred Stock Directors), must (unless such request is received less than 90 days before the date fixed for the next annual or special meeting of the stockholders of the Company, in which event such election shall be held at such next annual or special meeting of stockholders), call a special meeting of the holders of Series V Preferred Stock and any dividend parity stock for the purposes of electing Preferred Stock Directors. The Preferred Stock Directors shall each be entitled to one vote per director on any matter.
(iii) Notice of Special Meeting. Notice for a special meeting to elect Preferred Stock Directors will be given in a similar manner to that provided in the Company’s by-laws for a special meeting of the stockholders. If the secretary of the Company does not call a special meeting within 20 days after receipt of any such request, then any Holder may (at the expense of the Company) call such meeting, upon notice as provided in this Section 7(b)(iii), and for that purpose will have access to the stock register of the Company. The Preferred Stock Directors elected at any such special meeting and each Preferred Stock Director elected at a subsequent annual or special meeting of stockholders, will be elected for term expiring upon the earlier of the Preferred Stock Director Termination Date and the next annual meeting of stockholders following such Preferred Stock Director's election. In case any vacancy in the office of a Preferred Stock Director occurs (other than prior to the initial election of the Preferred Stock Directors), the vacancy may be filled by the Preferred Stock Director remaining in office, or if none remains in office, by a plurality of the votes cast by the holders of Series V Preferred Stock and any dividend parity stock, voting together as a single class, and the Preferred Stock Director so appointed or elected to fill such vacancy shall serve for a term expiring at the next annual meeting of the stockholders. Preferred Stock Directors may only be elected by the holders of Series V Preferred Stock and dividend parity stock in accordance with this Section 7. If the holders of Series V Preferred Stock and such dividend parity stock fail to elect a sufficient number of directors to fill all directorships for which they are entitled to elect directors pursuant to this Section 7, then any directorship not so filled shall remain vacant until such time as the holders of Series V Preferred Stock and such dividend parity stock elect a person to fill such directorship in accordance with this Section 7, or such vacancy is otherwise filled in accordance with this Section 7; and no such directorship may be filled by stockholders of the Corporation other than in accordance with this Section 7.
(iv) Termination; Removal. Whenever the Company has paid noncumulative dividends in full for at least two consecutive semi-annual or four consecutive quarterly dividend periods following a Nonpayment on the Series V Preferred Stock and on any dividend parity stock entitled to noncumulative dividends and has paid cumulative dividends in full on any dividend parity stock entitled to cumulative dividends, then the
right of the Holders to elect the Preferred Stock Directors will cease (but subject always to the same provisions for the vesting of the special voting rights in the case of any similar non-payment of dividends in respect of future dividend periods) (the time of such cessation, the “Preferred Stock Director Termination Date”). Upon a Preferred Stock Director Termination Date, the terms of office of the Preferred Stock Directors will immediately terminate, the persons then serving as Preferred Stock Directors shall immediately cease to be qualified to hold office as Preferred Stock Directors, the Preferred Stock Directors shall cease to be directors of the Company and the number of directors constituting the Board of Directors shall be automatically reduced, without any action by the Board of Directors or the stockholders of the Company, by the number of Preferred Stock Directors authorized immediately prior to such termination. Any Preferred Stock Director may be removed at any time without cause by the holders of a majority of the voting power of outstanding shares of the capital stock then entitled to vote in the election of Preferred Stock Directors, voting together as a single class (with such voting power measured based on the voting power to elect Preferred Stock Directors).
(c) Senior Issuances; Adverse Changes. So long as any shares of Series V Preferred Stock are outstanding, but subject to the final paragraph of this Section 7(c), in addition to any other vote or consent of holders of the Company’s capital stock required by Delaware law, the vote or consent of the holders of at least two-thirds of the voting power of the Series V Preferred Stock and the holders of any other preferred stock entitled to vote thereon, voting together as a single class, given in person or by proxy at an annual or special meeting of stockholders, or given in writing without a meeting, will be necessary for effecting or validating any of the following actions, whether or not such approval is required by Delaware law:
(i) any amendment, alteration or repeal of any provision of the Company’s certificate of incorporation (including the certificate of designations creating the Series V Preferred Stock) or the Company’s by-laws that would alter or change the voting powers, preferences, economic rights or special rights of the Series V Preferred Stock so as to affect them adversely;
(ii) any amendment or alteration of the Company’s certificate of incorporation to authorize or create, or increase the authorized amount of, any shares of, or any securities convertible into shares of, any class or series of the Company's capital stock ranking prior to the Series V Preferred Stock in the payment of dividends or in the distribution of assets on any liquidation, dissolution, or winding up of the Company; or
(iii) the consummation of a binding share exchange or reclassification involving the Series V Preferred Stock or a merger or consolidation of the Company with another entity, except that holders of Series V Preferred Stock will have no right to vote under this provision or otherwise under Delaware law if in each case (i) the Series V Preferred Stock remains outstanding or, in the case of any such merger or consolidation with respect to which the Company is not the surviving or resulting entity, is converted into or exchanged for preferred securities of the surviving or resulting entity or its ultimate parent, that is an entity organized and existing under the laws of the United States of
America, any state thereof or the District of Columbia and that is a corporation for U.S. federal income tax purposes (or if such entity is not a corporation, the Company having received an opinion of nationally recognized counsel experienced in such matters to the effect that Holders will be subject to tax for U.S. federal income tax purposes with respect to such new preferred securities after such merger or consolidation in the same amount, at the same time and otherwise in the same manner as would have been the case under the Series V Preferred Stock prior to such merger or consolidation), and (ii) such Series V Preferred Stock remaining outstanding or such preferred securities, as the case may be, have such rights, preferences, privileges and voting powers, taken as a whole, as are not materially less favorable to the holders thereof than the rights, preferences, privileges and voting powers of the Series V Preferred Stock, taken as a whole;
provided, however, that, for the avoidance of doubt, any increase in the amount of the authorized or issued Series V Preferred Stock or authorized preferred stock or any securities convertible into preferred stock or the creation and issuance, or an increase in the authorized or issued amount, of other series of preferred stock or any securities convertible into preferred stock ranking equally with and/or junior to the Series V Preferred Stock with respect to the payment of dividends (whether such dividends are cumulative or noncumulative) and/or the distribution of assets upon the Company’s liquidation, dissolution or winding up will not be deemed to adversely affect the voting powers, preferences or special rights of the Series V Preferred Stock, and no stockholder will have the right to vote on such an increase, creation or issuance by reason of this Section 7.
If any amendment, alteration, repeal, share exchange, reclassification, merger or consolidation specified in this Section 7(c) would adversely affect one or more but not all series of preferred stock of the Company, then only such series of preferred stock as are adversely affected by and entitled to vote on the matter shall vote on the matter together with the Series V Preferred Stock as a single class (in lieu of all other series of preferred stock) for purposes of the vote or consent required by this Section 7(c).
(d) No Vote if Redemption. No vote or consent of the Holders shall be required pursuant to Section 7(b) or 7(c) if, at or prior to the time when the act with respect to such vote or consent would otherwise be required shall be effected, the Company shall have redeemed or shall have called for redemption all outstanding shares of Series V Preferred Stock, with proper notice and sufficient funds having been set aside for such redemption, in each case pursuant to Section 6 above.
Section 8. Preemption and Conversion Rights.
The Holders shall not have any preemptive rights or conversion rights as a result of the terms hereof.
Section 9. Rank.
For the avoidance of doubt, the Board of Directors or any duly authorized committee thereof may, without the vote of the Holders, authorize and issue additional shares of Junior Stock or shares of any class or series of stock of the Company now existing or hereafter authorized that ranks equally with the Series V Preferred Stock in the payment of dividends or in the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the Company.
Section 10. Reacquired Shares.
The Board of Directors shall take such actions as are necessary to cause the shares of Series V Preferred Stock which have been redeemed or otherwise purchased or acquired by the Company to be retired and restored to the status of authorized but unissued shares of preferred stock without designation as to series.
Section 11. No Sinking Fund.
Shares of Series V Preferred Stock are not subject to the operation of a sinking fund.
Section 12. Transfer Agent, Calculation Agent, Registrar and Paying Agent.
The duly appointed Transfer Agent, Registrar and paying agent for the Series V Preferred Stock shall be Computershare Trust Company, N.A. The duly appointed Calculation Agent for the Series V Preferred Stock shall be Citibank, N.A., London branch. The Company may, in its sole discretion, remove the Transfer Agent and/or the Calculation Agent in accordance with the respective agreements between the Company and the Transfer Agent and the Company and the Calculation Agent; provided, however, that the Company shall appoint a successor transfer agent and/or calculation agent who shall accept such appointment prior to the effectiveness of such removal. Upon any such removal or appointment, the Company shall send notice thereof by first-class mail, postage prepaid, to the Holders.
Section 13. Replacement Certificates for Mutilated, Destroyed, Stolen and Lost Certificates.
If physical certificates are issued, the Company shall replace any mutilated certificate at the Holder’s expense upon surrender of that certificate to the Transfer Agent. The Company shall replace certificates that become destroyed, stolen or lost at the Holder’s expense upon delivery to the Company and the Transfer Agent of satisfactory evidence that the certificate has been destroyed, stolen or lost, together with any indemnity that may be required by the Transfer Agent and the Company.
Section 14. Form.
(a) Series V Preferred Stock Certificates. Series V Preferred Stock shall be issued in certificated form in substantially the form attached hereto as Exhibit A (each, a “Series V Preferred Stock Certificate”). Exhibit A is hereby incorporated in and expressly made a part of this Certificate of Designations. The Series V Preferred Stock Certificates may have notations, legends or endorsements required by law, stock exchange rules, agreements to which the Company is subject, if any, or usage (provided that any such notation, legend or endorsement is in a form acceptable to the Company).
(b) Signature. Two Officers shall sign any Series V Preferred Stock Certificate for the Company, in accordance with the Company’s by-laws and applicable law, by manual or facsimile signature. If an Officer whose signature is on a Series V Preferred Stock Certificate no longer holds that office at the time the Transfer Agent countersigned the Series V Preferred Stock Certificate, such Series V Preferred Stock Certificate shall be valid nevertheless. A Series V Preferred Stock Certificate shall not be valid until an authorized signatory of the Transfer Agent manually countersigns such Series V Preferred Stock Certificate. Each Series V Preferred Stock Certificate shall be dated the date of its countersignature.
Section 15. Taxes.
(a) Transfer Taxes. The Company shall pay any and all stock transfer, documentary, stamp and similar taxes that may be payable in respect of any issuance or delivery of shares of Series V Preferred Stock. The Company shall not, however, be required to pay any such tax that may be payable in respect of any transfer involved in the issuance or delivery of shares of Series V Preferred Stock, in a name other than that in which the shares of Series V Preferred Stock were registered, or in respect of any payment to any Person other than a payment to the registered holder thereof, and shall not be required to make any such issuance, delivery or payment unless and until the Person otherwise entitled to such issuance, delivery or payment has paid to the Company the amount of any such tax or has established, to the satisfaction of the Company, that such tax has been paid or is not payable.
(b) Withholding. All payments and distributions (or deemed distributions) on the shares of Series V Preferred Stock shall be subject to withholding and backup withholding of tax to the extent required by law, subject to applicable exemptions, and amounts withheld, if any, shall be treated as received by Holders.
Section 16. Notices.
All notices referred to herein shall be in writing, and, unless otherwise specified herein, all notices hereunder shall be deemed to have been given upon the earlier of receipt thereof or three business days after the mailing thereof if sent by registered or certified mail (unless first class mail shall be specifically permitted for such notice under the terms of this Certificate of Designations) with postage prepaid, addressed: (i) if to the Company, to its office at 388
Greenwich Street, New York, New York 10013 (Attention: Corporate Secretary) or to the Transfer Agent at its office at 150 Royall Street, Canton, Massachusetts 02021, or other agent of the Company designated as permitted by this Certificate of Designations, or (ii) if to any Holder, to such Holder at the address of such Holder as listed in the stock record books of the Company (which may include the records of the Transfer Agent) or (iii) to such other address as the Company or any such Holder, as the case may be, shall have designated by notice similarly given.
Section 17. Other Rights Disclaimed.
The shares of Series V Preferred Stock have no voting powers, preferences or relative, participating, optional or other special rights, or qualifications, limitations or restrictions thereof, other than as set forth herein or in the Certificate of Incorporation of the Company.
| Series V |
|---|
IN WITNESS WHEREOF, this Certificate of Designations has been executed on behalf of the Company by its Treasurer this 22nd day of January, 2020.
CITIGROUP INC.
By: _/s/ Michael Verdeschi________________________
Name: Michael Verdeschi
Title: Treasurer
Exhibit A
FORM OF
4.700% FIXED RATE / FLOATING RATE NONCUMULATIVE PREFERRED STOCK, SERIES V
Certificate Number_______ Number of Shares of Series V Preferred Stock______
CUSIP NO.:
CITIGROUP INC.
4.700% Fixed Rate / Floating Rate Noncumulative Preferred Stock, Series V
(par value $1.00 per share)
(liquidation preference $25,000 per share)
Citigroup Inc., a Delaware corporation (the “Company”), hereby certifies that [ ] (the “Holder”) is the registered owner of [ ] fully paid and non-assessable shares of the Company’s designated 4.700% Fixed Rate / Floating Rate Noncumulative Preferred Stock, Series V, with a par value of $1.00 per share and a liquidation preference of $25,000 per share (the “Series V Preferred Stock”). The shares of Series V Preferred Stock are transferable on the books and records of the Registrar, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer. The designations, rights, privileges, restrictions, preferences and other terms and provisions of the Series V Preferred Stock represented hereby are and shall in all respects be subject to the provisions of the Certificate of Designations dated January 22, 2020 as the same may be amended from time to time (the “Certificate of Designations”). Capitalized terms used herein but not defined shall have the meaning given them in the Certificate of Designations. The Company will provide a copy of the Certificate of Designations to a Holder without charge upon written request to the Company at its principal place of business.
Reference is hereby made to select provisions of the Series V Preferred Stock set forth on the reverse hereof, and to the Certificate of Designations, which select provisions and the Certificate of Designations shall for all purposes have the same effect as if set forth at this place.
Upon receipt of this certificate, the Holder is bound by the Certificate of Designations and is entitled to the benefits thereunder.
Unless the Registrar has properly countersigned, these shares of Series V Preferred Stock shall not be entitled to any benefit under the Certificate of Designations or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, this certificate has been executed on behalf of the Company by its [Title] and by its [Title] this __ day of _______, ________.
CITIGROUP INC.
By: _______________________________________
Name:
Title:
By: _______________________________________
Name:
Title:
REGISTRAR’S COUNTERSIGNATURE
These are shares of Series V Preferred Stock referred to in the within-mentioned Certificate of Designations.
Dated:
COMPUTERSHARE TRUST COMPANY, N.A., as Registrar
By: _______________________________________
Name:
Title:
REVERSE OF CERTIFICATE
Dividends on each share of Series V Preferred Stock shall be payable at the rate provided in the Certificate of Designations.
The shares of Series V Preferred Stock shall be redeemable at the option of the Company in the manner and in accordance with the terms set forth in the Certificate of Designations.
The Company shall furnish without charge to each holder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class or Series of share capital issued by the Company and the qualifications, limitations or restrictions of such preferences and/or rights.
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers the shares of Series V Preferred Stock evidenced hereby to:
___________________________________________________
___________________________________________________
(Insert assignee’s social security or taxpayer identification number, if any)
___________________________________________________
___________________________________________________
(Insert address and zip code of assignee)
and irrevocably appoints:
___________________________________________________
___________________________________________________
as agent to transfer the shares of Series V Preferred Stock evidenced hereby on the books of the Transfer Agent. The agent may substitute another to act for him or her.
Date:
Signature:
___________________________________________________
(Sign exactly as your name appears on the other side of this Certificate)
Signature Guarantee: ___________________________________________________
(Signature must be guaranteed by an “eligible guarantor institution” that is a bank, stockbroker, savings and loan association or credit union meeting the requirements of the Transfer Agent, which requirements include membership or participation in the Securities Transfer Agents Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Transfer Agent in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.)
CERTIFICATE OF RETIREMENT
OF PREFERRED STOCK
OF CITIGROUP INC.
(Pursuant to Section 243 of the General
Corporation Law of the State of Delaware)
CITIGROUP INC., a corporation duly organized and existing under the General Corporation Law of the State of Delaware, certifies as follows:
FIRST: Citigroup's Restated Certificate of Incorporation, as amended (the "Certificate of Incorporation"), authorizes the issuance of 60,000 shares of 5.875% Fixed Rate / Floating Rate Non-Cumulative Preferred Stock, Series O (the "Preferred Stock, Series O"), each such share with $1.00 par value and a stated value of $25,000 per share.
SECOND: Citigroup has retired all of the authorized shares of the Preferred Stock, Series O.
THIRD: Pursuant to the provisions of Section 243 of the General Corporation Law of the State of Delaware, the shares that were designated to Preferred Stock, Series O are hereby returned to the status of authorized but unissued shares of the Preferred Stock of Citigroup Inc.
IN WITNESS WHEREOF, CITIGROUP INC. has caused this certificate to be signed by the below duly authorized Assistant Treasurer this 31st day of March, 2020.
CITIGROUP INC
By: /s/ Elissa Steinberg______________
Elissa Steinberg
Assistant Treasurer
CERTIFICATE OF DESIGNATIONS
OF
4.000% FIXED RATE RESET NONCUMULATIVE PREFERRED STOCK SERIES W
OF
CITIGROUP INC.
______________________________
pursuant to Section 151 of the
General Corporation Law of the State of Delaware
______________________________
Citigroup Inc., a Delaware corporation (the “Company”), hereby certifies that:
-
The Restated Certificate of Incorporation of the Company \(as amended through the date hereof, the “Certificate of Incorporation”\) fixes the total number of shares of all classes of capital stock that the Company shall have the authority to issue at six billion \(6,000,000,000\) shares of common stock, par value $0.01 per share, and thirty million \(30,000,000\) shares of preferred stock, par value $1.00 per share. -
The Certificate of Incorporation expressly grants to the Board of Directors of the Company \(the “Board of Directors”\) authority to provide for the issuance of the shares of preferred stock in series, and to establish from time to time the number of shares to be included in each such series and to fix the designation, powers, preferences and rights of the shares of each such series and the qualifications, limitations or restrictions thereof. -
Pursuant to the authority conferred upon a preferred stock committee \(the “Preferred Stock Committee”\) by the Board of Directors, the Preferred Stock Committee, by action duly taken on December 3, 2020, adopted resolutions \(i\) authorizing the issuance and sale of up to 60,000 shares of the Company’s preferred stock and \(ii\) approving this final form of Certificate of Designations of 4.000% Fixed Rate Reset Noncumulative Preferred Stock, Series W \(the “Series W Preferred Stock”\), establishing the number of shares to be included in this Series W Preferred Stock and fixing the designation, powers, preferences and rights of the shares of this Series W Preferred Stock and the qualifications, limitations or restrictions thereof as follows:
Section 1. Designation.
The designation of the series of preferred stock shall be “4.000% Fixed Rate Reset Noncumulative Preferred Stock, Series W”. Each share of Series W Preferred Stock shall be identical in all respects to every other share of Series W Preferred Stock.
Section 2. Number of Shares.
The number of authorized shares of Series W Preferred Stock shall be 60,000. That number from time to time may be increased (but not in excess of the total number of authorized shares of preferred stock) or decreased (but not below the number of shares of Series W Preferred Stock then outstanding) by further resolution duly adopted by the Board of Directors, the Preferred Stock Committee or any other duly authorized committee thereof and by the filing of a certificate pursuant to the provisions of the General Corporation Law of the State of Delaware stating that such increase or reduction, as the case may be, has been so authorized. The Company shall have the authority to issue fractional shares of Series W Preferred Stock.
Section 3. Definitions. As used herein with respect to Series W Preferred Stock:
“Appropriate Federal Banking Agency” means the “appropriate Federal banking agency” with respect to the Company as that term is defined in Section 3(q) of the Federal Deposit Insurance Act of 1950, as amended, or any successor provision.
“Board of Directors” has the meaning set forth in the recitals above.
“business day” means any weekday that is not a legal holiday in New York City and is not a day on which banking institutions in New York City are authorized or required by law or regulation to be closed.
“Calculation Agent” means the Transfer Agent acting in its capacity as calculation agent
for the Series W Preferred Stock, and its successors and assigns.
“Common Stock” means the common stock of the Company, par value $0.01 per share, or any other shares of the capital stock of the Company into which such shares of common stock shall be reclassified or changed.
“Depositary” means DTC or its nominee or any successor depositary appointed by the Company.
“dividend payment date” shall have the meaning set forth in Section 4(a) hereof.
“dividend period” shall have the meaning set forth in Section 4(a) hereof.
“Dividend Record Date” shall have the meaning set forth in Section 4(a) hereof.
“DTC” means The Depository Trust Company.
“First Reset Date” shall have the meaning set forth in Section 4(a) hereof.
“Holder” means the Person in whose name the shares of the Series W Preferred Stock are registered, which may be treated by the Company, Calculation Agent, Transfer Agent, Registrar and paying agent as the absolute owner of the shares of Series W Preferred Stock for the purpose of making payment and for all other purposes.
“Junior Stock” means the Common Stock and any other class or series of stock of the
Company now existing or hereafter authorized over which Series W Preferred Stock has
preference or priority in the payment of dividends or in the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the Company.
“Nonpayment” shall have the meaning set forth in Section 7(b)(i) hereof.
“NY Federal Reserve’s website” shall have the meaning set forth in Section 4(a) hereof.
“Officer” means the Chief Executive Officer, the Chairman, the Chief Administrative Officer, any Vice Chairman, the Chief Financial Officer, the Controller, the Chief Accounting Officer, the Treasurer, any Deputy Treasurer, any Assistant Treasurer, any Vice President, the General Counsel and Corporate Secretary and any Assistant Secretary of the Company.
“Person” means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint-stock company, limited liability company, trust, or other entity.
“Preferred Stock Director” shall have the meaning set forth in Section 7(b)(i) hereof.
“Preferred Stock Director Termination Date” shall have the meaning set forth in Section 7(b)(iv) hereof.
“Registrar” means the Transfer Agent acting in its capacity as registrar for the Series W Preferred Stock, and its successors and assigns.
“Regulatory Capital Event” means the good faith determination by the Company that, as a result of (i) any amendment to, clarification of, or change in, the laws or regulations of the United States (including, for the avoidance of doubt, any agency or instrumentality of the United States, including the Federal Reserve and other federal bank regulatory agencies) or any political subdivision of or in the United States that is enacted or becomes effective after the initial issuance of any share of the Series W Preferred Stock, (ii) any proposed change in those laws or regulations that is announced or becomes effective after the initial issuance of any share of the Series W Preferred Stock, or (iii) any official administrative decision or judicial decision or administrative action or other official pronouncement interpreting or applying those laws or regulations or policies with respect thereto that is announced after the initial issuance of any share of the Series W Preferred Stock, there is more than an insubstantial risk that the Company will not be entitled to treat the full liquidation preference amount of $25,000 per share of the Series W Preferred Stock then outstanding as “tier 1 capital” (or its equivalent) for purposes of the capital adequacy guidelines of the Federal Reserve (or, as and if applicable, the capital adequacy guidelines or regulations of any successor Appropriate Federal Banking Agency) as then in effect and applicable, for so long as any share of the Series W Preferred Stock is outstanding.
“Relevant Governmental Body” shall have the meaning set forth in Section 4(a) hereof.
“reset date” means the First Reset Date and each date falling on the fifth anniversary of the preceding reset date, and no reset date, including the First Reset Date, will be adjusted for business days.
“reset dividend determination date” means, in respect of any reset period, the day that is three business days prior to the beginning of such reset period.
“reset period” means the period from, and including, each reset date to, but excluding, the next succeeding reset date, except for the initial reset period, which will be the period from, and including, the First Reset Date to, but excluding, the next succeeding reset date.
“Series W Liquidation Preference” shall have the meaning set forth in Section 5(a) hereof.
“Series W Preferred Stock” shall have the meaning set forth in Section 1 hereof.
“Series W Preferred Stock Certificate” shall have the meaning set forth in Section 14(a) hereof.
“Transfer Agent” means Computershare Trust Company, N.A., a federally chartered national association, acting as Transfer Agent, Calculation Agent, Registrar and paying agent for the Series W Preferred Stock, and its successors and assigns.
“Trust” shall have the meaning set forth in Section 6(d).
Section 4. Dividends.
a.Rate. Holders shall be entitled to receive, when, as and if declared by the Board of Directors or any duly authorized committee thereof, but only out of funds legally available therefor, noncumulative cash dividends on each share of Series W Preferred Stock in the amounts specified below in this Section 4, and no more, payable on the 10th of each March, June, September and December (each, a “dividend payment date”), (i) quarterly in arrears from, and including, the date of issuance to, but excluding, December 10, 2025 (the “First Reset Date”), at an annual rate of 4.000% on the liquidation preference of $25,000 per share, beginning on March 10, 2021, and (ii) from, and including the First Reset Date, for each reset period, at an annual rate equal to the five-year treasury rate as of the most recent reset dividend determination date (as described below) plus 3.597% on the liquidation preference of $25,000 per share, quarterly in arrears, beginning on March 10, 2026.
The record date for payment of dividends on the Series W Preferred Stock will be the record date fixed by the Board of Directors or any other duly authorized committee thereof that is not more than 30 nor less than 10 days prior to such dividend payment date (each, a “Dividend Record Date”). Any such day that is a Dividend Record Date will be a Dividend Record Date whether or not such day is a business day.
For any reset period beginning on or after the First Reset Date, the five-year treasury rate will be:
• The average of the yields on actively traded U.S. treasury securities adjusted to constant maturity, for five-year maturities, for the five business days appearing under the caption “Treasury Constant Maturities’’ in the most recently published statistical release designated H.15 Daily Update or any successor publication which is published by the Federal Reserve Board as of 5:00 p.m. (Eastern Time) as of any date of determination, as determined by the Calculation Agent in its sole discretion.
• If no calculation is provided as described above, then the Company (or such affiliate) will use a substitute or successor rate that it has determined, in its sole discretion after consulting any source it deems to be reasonable, is (i) the industry-accepted substitute or successor for the five-year treasury rate or (ii) if there is no such industry-accepted substitute or successor for the five-year treasury rate, a substitute or successor rate that is most comparable to the five-year treasury rate. Upon selection of a substitute or
successor rate, the Company (or such affiliate) may determine, in its sole discretion after consulting any source it deems to be reasonable, the day count convention, the business day convention, the definition of business day, the reset dividend determination date and any other relevant methodology or definition for calculating such substitute or successor rate, including any adjustment factor it determines is needed to make such substitute or successor rate comparable to the five-year treasury rate, in a manner that is consistent with any industry-accepted practices for such substitute or successor rate.
The five-year treasury rate will be determined on each reset dividend determination date.
With respect to any dividend period, any dividends on the Series W Preferred Stock will be calculated on the basis of a 360-day year of twelve 30-day months, and “dividend period” means the period from, and including, each dividend payment date to, but excluding, the next succeeding dividend payment date, except for the initial dividend period, which will be the period from, and including, the date of issuance of the Series W Preferred Stock to, but excluding, the first dividend payment date. In the event that any dividend payment date is not a business day, then payment of any dividend payable on such date will be made on the next succeeding business day and without any additional dividend accrual or other payment in respect of any such postponement.
Any determination, decision or election that may be made by the Company (or one of its affiliates) pursuant to the provisions described above, including any determination with respect to tenor, rate or adjustment or of the occurrence or non-occurrence of an event, circumstance or date and any decision to take or refrain from taking any action or any selection, will be conclusive and binding absent manifest error, will be made in the Company’s (or such affiliate’s) sole discretion, and, notwithstanding anything to the contrary in this Certificate of Designations, shall become effective without consent from the holders of the Series W Preferred Stock or any other party.
All percentages resulting from any calculation of the dividend rate will be rounded, if necessary, to the nearest 1/100,000 of 1% (.0000001), with five one-millionths of a percentage point rounded upward. All currency amounts used in, or resulting from, the calculation on the Series W Preferred Stock will be rounded to the nearest one-hundredth of a unit. For purposes of rounding, .005 of a unit shall be rounded upward.
(b) Noncumulative Dividends. If the Board of Directors or any duly authorized committee thereof does not declare a dividend on the Series W Preferred Stock for any dividend period prior to the related dividend payment date, that dividend will not accrue, and the Company will have no obligation to pay, and Holders shall have no right to receive, a dividend for that dividend period on the related dividend payment date or at any future time, whether or not dividends on the Series W Preferred Stock or any other series of preferred stock or common stock are declared for any subsequent period. References herein to the “accrual” of dividends refer only to the determination of the amount of such dividend and do not imply that any right to a dividend arises prior to the date on which a dividend is declared.
(c) Priority of Dividends. So long as any share of Series W Preferred Stock remains outstanding, unless as to a dividend payment date full dividends on all outstanding shares of the Series W Preferred Stock have been declared and paid or declared and a sum sufficient for the payment of those dividends has been set aside for the dividend period then ending, the Company will not, and will cause its subsidiaries not to, during the next succeeding dividend period, declare or pay any dividend on, make any distributions relating to, or redeem, purchase, acquire or make a liquidation payment relating to, any Junior Stock, or make any guarantee payment with respect thereto, other than:
(i) purchases, redemptions or other acquisitions of shares of Junior Stock in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of employees, officers, directors or consultants;
(ii) purchases of shares of Common Stock pursuant to a contractually binding requirement to buy stock existing prior to the commencement of the then-current dividend period, including under a contractually binding stock repurchase plan;
(iii) as a result of an exchange or conversion of any class or series of Junior Stock for any other class or series of Junior Stock;
(iv) the purchase of fractional interests in shares of Junior Stock pursuant to the conversion or exchange provisions of such Junior Stock or the security being converted or exchanged;
(v) the purchase of Junior Stock by an investment banking subsidiary of the Company in connection with the distribution thereof; or
(vi) the purchase of Junior Stock by any investment banking subsidiary of the Company in connection with market-making or other secondary market activities in the ordinary course of the business of such subsidiary.
The restrictions set forth in the preceding provisions of this Section 4(c) shall not apply to any Junior Stock dividends paid by the Company where the dividend is in the form of the same stock (or the right to buy the same stock) as that on which the dividend is being paid.
Except as provided below, for so long as any share of Series W Preferred Stock remains outstanding, if dividends are not declared and paid in full upon the shares of Series W Preferred Stock and any class or series of stock of the Company now existing or hereafter authorized that ranks equally with the Series W Preferred Stock in the payment of dividends, all dividends declared upon shares of Series W Preferred Stock and such other stock will be declared on a proportional basis so that the amount of dividends declared per share will bear to each other the same ratio that accrued dividends for the then-current dividend period per share of Series W Preferred Stock and accrued dividends for the then-current dividend period per share of such other stock (including, in the case of any such other stock that bears cumulative dividends, all accrued and unpaid dividends) bear to each other.
Subject to the foregoing, and not otherwise, such dividends payable in cash, stock or otherwise, as may be determined by the Board of Directors or any duly authorized committee thereof, may be declared and paid on any other class or series of stock of the Company from time
to time out of any funds legally available for such payment, and Holders will not be entitled to participate in those dividends.
Section 5. Liquidation Rights.
(a) Liquidation. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company, Holders shall be entitled, out of funds legally available therefor, before any distribution or payment may be made by the Company or set aside for the holders of any Junior Stock and subject to the rights of the holders of any class or series of stock ranking senior to or on parity with Series W Preferred Stock upon liquidation and the rights of the Company’s depositors and other creditors, to receive in full a liquidating distribution in the amount of the liquidation preference of $25,000 per share (the “Series W Liquidation Preference”), plus any accrued dividends thereon from the last dividend payment date to, but excluding, the date of the liquidation, dissolution or winding up if and to the extent declared but not yet paid. Holders shall not be entitled to any further payments in the event of any such voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company other than what is expressly provided for in this Section 5.
(b) Partial Payment. If the assets of the Company are not sufficient to pay in full the aforesaid liquidation distributions to the Holders and any liquidation distributions owed to holders of any class or series of stock of the Company ranking equally with the Series W Preferred Stock in the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the Company, the amounts paid to the Holders and to the holders of all such equally ranking stock shall be pro rata in accordance with the respective aggregate liquidating distributions to which they would otherwise be entitled.
(c) Merger, Consolidation and Sale of Assets Not Liquidation. For purposes of this Section 5, the sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the property and assets of the Company shall not be deemed a voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, nor shall the merger, consolidation or any other business combination transaction of the Company into or with any other corporation or Person or the merger, consolidation or any other business combination transaction of any other corporation or Person into or with the Company be deemed to be a voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company.
Section 6. Redemption.
(a) Optional Redemption. The Company, at the option of its Board of Directors or any duly authorized committee thereof, may redeem out of funds legally available therefor, (i) in whole at any time or in part, from time to time, the shares of Series W Preferred Stock at the time outstanding, on any dividend payment date beginning on or after the First Reset Date, or (ii) in whole but not in part at any time within 90 days following a Regulatory Capital Event, in each case at a redemption price equal to $25,000 per share plus any declared and unpaid dividends, without accumulation of any undeclared dividends, to, but excluding, the redemption date, upon notice given as provided in Section 6(b) below.
(b) Notice of Redemption. Notice of every redemption of shares of Series W Preferred Stock shall be mailed by first class mail, postage prepaid, addressed to the Holders of such shares to be redeemed at their respective last addresses appearing on the stock register of the Company. Such mailing shall be at least 5 days and not more than 30 days before the date fixed for redemption. Any notice mailed as provided in this Section 6(b) shall be conclusively presumed to have been duly given, whether or not the Holder receives such notice, but failure duly to give such notice by mail, or any defect in such notice or in the mailing thereof, to any Holder of shares of Series W Preferred Stock designated for redemption shall not affect the validity of the proceedings for the redemption of any other shares of Series W Preferred Stock. Each notice shall state:
(i) the redemption date;
(ii) the total number of shares of Series W Preferred Stock to be redeemed and, if fewer than all the shares of a Holder are to be redeemed, the number of such shares to be redeemed;
(iii) the redemption price;
(iv) the place or places where the certificates for such shares are to be surrendered for payment of the redemption price, if applicable; and
(v) that dividends on the shares to be redeemed will cease to accrue on the redemption date.
Notwithstanding the foregoing, if the certificates evidencing the shares of Series W Preferred Stock are held of record by a depositary and any related depository shares are held of record by a Depositary or its nominee, the Company may give such notice in any manner permitted by the Depositary.
(c) Partial Redemption. In case of any redemption of only part of the shares of Series W Preferred Stock at the time outstanding, the shares of Series W Preferred Stock to be redeemed shall be selected (i) pro rata from the Holders in proportion to the number of shares of Series W Preferred Stock held by such Holders, (ii) by lot or (iii) in such other manner as the Board of Directors or any duly authorized committee thereof may determine, in its sole discretion, to be fair and equitable. Subject to the provisions of this Section 6, the Board of Directors or any duly authorized committee thereof shall have full power and authority to prescribe the terms and conditions upon which shares of Series W Preferred Stock shall be redeemed from time to time.
(d) Effectiveness of Redemption. If notice of redemption has been duly given and if on or before the redemption date specified in the notice all funds necessary for the redemption have been set aside by the Company, separate and apart from its other assets, for the pro rata benefit of the Holders of the shares called for redemption, so as to be and continue to be available therefor, or deposited by the Company with a bank or trust company selected by the Board of Directors or any duly authorized committee thereof (the “Trust”) in trust for the pro rata benefit of the Holders of the shares called for redemption, then, notwithstanding that any certificate for any share so called for redemption has not been surrendered for cancellation, on and after the
redemption date all shares so called for redemption shall cease to be outstanding, all dividends with respect to such shares shall cease to accrue on such redemption date, and all rights with respect to such shares shall forthwith on such redemption date cease and terminate, except only the right of the Holders thereof to receive the amount payable on such redemption from the Trust at any time after the redemption date from the funds so deposited, without interest. The Company shall be entitled to receive, from time to time, from the Trust any interest accrued on such funds, and the Holders of any shares called for redemption shall have no claim to any such interest. Any funds so deposited and unclaimed at the end of three years from the redemption date shall, to the extent permitted by law, be released or repaid to the Company, and in the event of such repayment to the Company, the Holders of the shares so called for redemption shall be deemed to be unsecured creditors of the Company for an amount equivalent to the amount deposited as stated above for the redemption of such shares and so repaid to the Company, but shall in no event be entitled to any interest.
Section 7. Voting Rights.
(a) General. The Holders shall not be entitled to vote on any matter except as set forth in Section 7(b) below or as required by the Delaware General Corporation Law.
(b) Special Voting Right.
(i) Voting Right. If and whenever dividends on the Series W Preferred Stock or any other class or series of preferred stock that ranks on parity with the Series W Preferred Stock as to payment of dividends and upon which voting rights equivalent to those granted by this Section 7(b)(i) have been conferred and are exercisable (any such class or series being referred to herein as “dividend parity stock”) have not been declared and paid in an aggregate amount equal, as to any class or series, to at least three semi-annual or six quarterly dividend periods, as applicable, (whether consecutive or not) (a “Nonpayment”), the authorized number of directors constituting the Board of Directors shall be increased by two, and the Holders, together with holders of dividend parity stock, shall have the right, voting separately as a single class without regard to class or series (and with voting rights allocated pro rata based on the liquidation preference of each such class or series), to the exclusion of the holders of Common Stock, to elect two directors of the Company to fill such newly created directorships (and to fill any vacancies in the terms of such directorships), provided that it shall be a qualification for election of any such director that the election of such director shall not cause the Company to violate the corporate governance requirements of the New York Stock Exchange (or other exchange on which the Company’s securities may be listed) that listed companies must have a majority of independent directors and further provided that the Board of Directors shall at no time include more than two such directors. Each such director elected by the Holders together with holders of dividend parity stock is a “Preferred Stock Director.”
(ii) Election. The election of the Preferred Stock Directors will take place at any annual meeting of stockholders or any special meeting of the Holders and any dividend parity stock, called as provided herein. At any time after the special voting power has vested pursuant to Section 7(b)(i) above, the secretary of the Company may, and upon the written request (addressed to the secretary at the Company’s principal office) of the holders of at least 20% of
the voting power of the Series W Preferred Stock or the holders of at least 20% of the voting power of any series of dividend parity stock then outstanding (with such voting power measured based on the voting power to elect Preferred Stock Directors), must (unless such request is received less than 90 days before the date fixed for the next annual or special meeting of the stockholders of the Company, in which event such election shall be held at such next annual or special meeting of stockholders), call a special meeting of the holders of Series W Preferred Stock and any dividend parity stock for the purposes of electing Preferred Stock Directors. The Preferred Stock Directors shall each be entitled to one vote per director on any matter.
(iii) Notice of Special Meeting. Notice for a special meeting to elect Preferred Stock Directors will be given in a similar manner to that provided in the Company’s by-laws for a special meeting of the stockholders. If the secretary of the Company does not call a special meeting within 20 days after receipt of any such request, then any Holder may (at the expense of the Company) call such meeting, upon notice as provided in this Section 7(b)(iii), and for that purpose will have access to the stock register of the Company. The Preferred Stock Directors elected at any such special meeting and each Preferred Stock Director elected at a subsequent annual or special meeting of stockholders, will be elected for term expiring upon the earlier of the Preferred Stock Director Termination Date and the next annual meeting of stockholders following such Preferred Stock Director's election. In case any vacancy in the office of a Preferred Stock Director occurs (other than prior to the initial election of the Preferred Stock Directors), the vacancy may be filled by the Preferred Stock Director remaining in office, or if none remains in office, by a plurality of the votes cast by the holders of Series W Preferred Stock and any dividend parity stock, voting together as a single class, and the Preferred Stock Director so appointed or elected to fill such vacancy shall serve for a term expiring at the next annual meeting of the stockholders. Preferred Stock Directors may only be elected by the holders of Series W Preferred Stock and dividend parity stock in accordance with this Section 7. If the holders of Series W Preferred Stock and such dividend parity stock fail to elect a sufficient number of directors to fill all directorships for which they are entitled to elect directors pursuant to this Section 7, then any directorship not so filled shall remain vacant until such time as the holders of Series W Preferred Stock and such dividend parity stock elect a person to fill such directorship in accordance with this Section 7, or such vacancy is otherwise filled in accordance with this Section 7; and no such directorship may be filled by stockholders of the Company other than in accordance with this Section 7.
(iv) Termination; Removal. Whenever the Company has paid noncumulative dividends in full for at least two consecutive semi-annual or four consecutive quarterly dividend periods following a Nonpayment on the Series W Preferred Stock and on any dividend parity stock entitled to noncumulative dividends and has paid cumulative dividends in full on any dividend parity stock entitled to cumulative dividends, then the right of the Holders to elect the Preferred Stock Directors will cease (but subject always to the same provisions for the vesting of the special voting rights in the case of any similar non-payment of dividends in respect of future dividend periods) (the time of such cessation, the “Preferred Stock Director Termination Date”). Upon a Preferred Stock Director Termination Date, the terms of office of the Preferred Stock Directors will immediately terminate, the persons then serving as Preferred Stock Directors shall immediately cease to be qualified to hold office as Preferred Stock Directors, the Preferred Stock Directors shall cease to be directors of the Company and the number of directors constituting the Board of Directors shall be automatically reduced, without any action by the Board of Directors
or the stockholders of the Company, by the number of Preferred Stock Directors authorized immediately prior to such termination. Any Preferred Stock Director may be removed at any time without cause by the holders of a majority of the voting power of outstanding shares of the capital stock then entitled to vote in the election of Preferred Stock Directors, voting together as a single class (with such voting power measured based on the voting power to elect Preferred Stock Directors).
(c) Senior Issuances; Adverse Changes. So long as any shares of Series W Preferred Stock are outstanding, but subject to the final paragraph of this Section 7(c), in addition to any other vote or consent of holders of the Company’s capital stock required by Delaware law, the vote or consent of the holders of at least two-thirds of the voting power of the Series W Preferred Stock and the holders of any other preferred stock entitled to vote thereon, voting together as a single class, given in person or by proxy at an annual or special meeting of stockholders, or given in writing without a meeting, will be necessary for effecting or validating any of the following actions, whether or not such approval is required by Delaware law:
(i) any amendment, alteration or repeal of any provision of the Company’s certificate of incorporation (including the certificate of designations creating the Series W Preferred Stock) or the Company’s by-laws that would alter or change the voting powers, preferences, economic rights or special rights of the Series W Preferred Stock so as to affect them adversely;
(ii) any amendment or alteration of the Company’s certificate of incorporation to authorize or create, or increase the authorized amount of, any shares of, or any securities convertible into shares of, any class or series of the Company's capital stock ranking prior to the Series W Preferred Stock in the payment of dividends or in the distribution of assets on any liquidation, dissolution, or winding up of the Company; or
(iii) the consummation of a binding share exchange or reclassification involving the Series W Preferred Stock or a merger or consolidation of the Company with another entity, except that holders of Series W Preferred Stock will have no right to vote under this provision or otherwise under Delaware law if in each case (i) the Series W Preferred Stock remains outstanding or, in the case of any such merger or consolidation with respect to which the Company is not the surviving or resulting entity, is converted into or exchanged for preferred securities of the surviving or resulting entity or its ultimate parent, that is an entity organized and existing under the laws of the United States of America, any state thereof or the District of Columbia and that is a corporation for U.S. federal income tax purposes (or if such entity is not a corporation, the Company having received an opinion of nationally recognized counsel experienced in such matters to the effect that Holders will be subject to tax for U.S. federal income tax purposes with respect to such new preferred securities after such merger or consolidation in the same amount, at the same time and otherwise in the same manner as would have been the case under the Series W Preferred Stock prior to such merger or consolidation), and (ii) such Series W Preferred Stock remaining outstanding or such preferred securities, as the case may be, have such rights, preferences, privileges and voting powers, taken as a whole, as are not materially less favorable to the holders thereof than the rights, preferences, privileges and voting powers of the Series W Preferred Stock, taken as a whole;
provided, however, that, for the avoidance of doubt, any increase in the amount of the authorized or issued Series W Preferred Stock or authorized preferred stock or any securities
convertible into preferred stock or the creation and issuance, or an increase in the authorized or issued amount, of other series of preferred stock or any securities convertible into preferred stock ranking equally with and/or junior to the Series W Preferred Stock with respect to the payment of dividends (whether such dividends are cumulative or noncumulative) and/or the distribution of assets upon the Company’s liquidation, dissolution or winding up will not be deemed to adversely affect the voting powers, preferences or special rights of the Series W Preferred Stock, and no stockholder will have the right to vote on such an increase, creation or issuance by reason of this Section 7.
If any amendment, alteration, repeal, share exchange, reclassification, merger or consolidation specified in this Section 7(c) would adversely affect one or more but not all series of preferred stock of the Company, then only such series of preferred stock as are adversely affected by and entitled to vote on the matter shall vote on the matter together with the Series W Preferred Stock as a single class (in lieu of all other series of preferred stock) for purposes of the vote or consent required by this Section 7(c).
(d) No Vote if Redemption. No vote or consent of the Holders shall be required pursuant to Section 7(b) or 7(c) if, at or prior to the time when the act with respect to such vote or consent would otherwise be required shall be effected, the Company shall have redeemed or shall have called for redemption all outstanding shares of Series W Preferred Stock, with proper notice and sufficient funds having been set aside for such redemption, in each case pursuant to Section 6 above.
Section 8. Preemption and Conversion Rights.
The Holders shall not have any preemptive rights or conversion rights as a result of the terms hereof.
Section 9. Rank.
For the avoidance of doubt, the Board of Directors or any duly authorized committee thereof may, without the vote of the Holders, authorize and issue additional shares of Junior Stock or shares of any class or series of stock of the Company now existing or hereafter authorized that ranks equally with the Series W Preferred Stock in the payment of dividends or in the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the Company.
Section 10. Reacquired Shares.
The Board of Directors shall take such actions as are necessary to cause the shares of Series W Preferred Stock which have been redeemed or otherwise purchased or acquired by the Company to be retired and restored to the status of authorized but unissued shares of preferred stock without designation as to series.
Section 11. No Sinking Fund.
Shares of Series W Preferred Stock are not subject to the operation of a sinking fund.
Section 12. Transfer Agent, Calculation Agent, Registrar and Paying Agent.
The duly appointed Transfer Agent, Calculation Agent, Registrar and paying agent for the Series W Preferred Stock shall be Computershare Trust Company, N.A. The Company may, in its sole discretion, remove the Transfer Agent and/or the Calculation Agent in accordance with the agreements between the Company and the Transfer Agent; provided, however, that the Company shall appoint a successor transfer agent and/or calculation agent who shall accept such appointment prior to the effectiveness of such removal. Upon any such removal or appointment, the Company shall send notice thereof by first-class mail, postage prepaid, to the Holders.
Section 13. Replacement Certificates for Mutilated, Destroyed, Stolen and Lost Certificates.
If physical certificates are issued, the Company shall replace any mutilated certificate at the Holder’s expense upon surrender of that certificate to the Transfer Agent. The Company shall replace certificates that become destroyed, stolen or lost at the Holder’s expense upon delivery to the Company and the Transfer Agent of satisfactory evidence that the certificate has been destroyed, stolen or lost, together with any indemnity that may be required by the Transfer Agent and the Company.
Section 14. Form.
(a) Series W Preferred Stock Certificates. Series W Preferred Stock shall be issued in certificated form in substantially the form attached hereto as Exhibit A (each, a “Series W Preferred Stock Certificate”). Exhibit A is hereby incorporated in and expressly made a part of this Certificate of Designations. The Series W Preferred Stock Certificates may have notations, legends or endorsements required by law, stock exchange rules, agreements to which the Company is subject, if any, or usage (provided that any such notation, legend or endorsement is in a form acceptable to the Company).
(b) Signature. Two Officers shall sign any Series W Preferred Stock Certificate for the Company, in accordance with the Company’s by-laws and applicable law, by manual or facsimile signature. If an Officer whose signature is on a Series W Preferred Stock Certificate no longer holds that office at the time the Transfer Agent countersigned the Series W Preferred Stock Certificate, such Series W Preferred Stock Certificate shall be valid nevertheless. A Series W Preferred Stock Certificate shall not be valid until an authorized signatory of the Transfer Agent manually countersigns such Series W Preferred Stock Certificate. Each Series W Preferred Stock Certificate shall be dated the date of its countersignature.
Section 15. Taxes.
(a) Transfer Taxes. The Company shall pay any and all stock transfer, documentary, stamp and similar taxes that may be payable in respect of any issuance or delivery of shares of Series W Preferred Stock. The Company shall not, however, be required to pay any such tax that may be payable in respect of any transfer involved in the issuance or delivery of shares of Series W Preferred Stock, in a name other than that in which the shares of Series W Preferred Stock were registered, or in respect of any payment to any Person other than a payment to the registered holder thereof, and shall not be required to make any such issuance, delivery or payment unless and until the Person otherwise entitled to such issuance, delivery or payment has paid to the Company the amount of any such tax or has established, to the satisfaction of the Company, that such tax has been paid or is not payable.
(b) Withholding. All payments and distributions (or deemed distributions) on the shares of Series W Preferred Stock shall be subject to withholding and backup withholding of tax to the extent required by law, subject to applicable exemptions, and amounts withheld, if any, shall be treated as received by Holders.
Section 16. Notices.
All notices referred to herein shall be in writing, and, unless otherwise specified herein, all notices hereunder shall be deemed to have been given upon the earlier of receipt thereof or three business days after the mailing thereof if sent by registered or certified mail (unless first class mail shall be specifically permitted for such notice under the terms of this Certificate of Designations) with postage prepaid, addressed: (i) if to the Company, to its office at 388 Greenwich Street, New York, New York 10013 (Attention: Corporate Secretary) or to the Transfer Agent at its office at 150 Royall Street, Canton, Massachusetts 02021, or other agent of the Company designated as permitted by this Certificate of Designations, or (ii) if to any Holder, to such Holder at the address of such Holder as listed in the stock record books of the Company (which may include the records of the Transfer Agent) or (iii) to such other address as the Company or any such Holder, as the case may be, shall have designated by notice similarly given.
Section 17. Other Rights Disclaimed.
The shares of Series W Preferred Stock have no voting powers, preferences or relative, participating, optional or other special rights, or qualifications, limitations or restrictions thereof, other than as set forth herein or in the Certificate of Incorporation of the Company.
IN WITNESS WHEREOF, this Certificate of Designations has been executed on behalf of the Company by its Treasurer this 9th day of December, 2020.
CITIGROUP INC.
By: /s/ Michael Verdeschi________________ Name: Michael Verdeschi Title: Treasurer
Exhibit A
FORM OF 4.000% FIXED RATE RESET NONCUMULATIVE PREFERRED STOCK, SERIES W
Certificate Number_______ Number of Shares of Series W Preferred Stock______
CUSIP NO.:
CITIGROUP INC.
4.000% Fixed Rate Reset Noncumulative Preferred Stock, Series W
(par value $1.00 per share) (liquidation preference $25,000 per share)
Citigroup Inc., a Delaware corporation (the “Company”), hereby certifies that [ ] (the “Holder”) is the registered owner of [ ] fully paid and non-assessable shares of the Company’s designated 4.000% Fixed Rate Reset Noncumulative Preferred Stock, Series W, with a par value of $1.00 per share and a liquidation preference of $25,000 per share (the “Series W Preferred Stock”). The shares of Series W Preferred Stock are transferable on the books and records of the Registrar, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer. The designations, rights, privileges, restrictions, preferences and other terms and provisions of the Series W Preferred Stock represented hereby are and shall in all respects be subject to the provisions of the Certificate of Designations dated December 9, 2020 as the same may be amended from time to time (the “Certificate of Designations”). Capitalized terms used herein but not defined shall have the meaning given them in the Certificate of Designations. The Company will provide a copy of the Certificate of Designations to a Holder without charge upon written request to the Company at its principal place of business.
Reference is hereby made to select provisions of the Series W Preferred Stock set forth on the reverse hereof, and to the Certificate of Designations, which select provisions and the Certificate of Designations shall for all purposes have the same effect as if set forth at this place.
Upon receipt of this certificate, the Holder is bound by the Certificate of Designations and is entitled to the benefits thereunder.
Unless the Registrar has properly countersigned, these shares of Series W Preferred Stock shall not be entitled to any benefit under the Certificate of Designations or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, this certificate has been executed on behalf of the Company by its [Title] and by its [Title] this __ day of _______, ________.
CITIGROUP INC.
By: _______________________________________ Name: Title:
By: _______________________________________ Name: Title:
REGISTRAR’S COUNTERSIGNATURE
These are shares of Series W Preferred Stock referred to in the within-mentioned Certificate of Designations.
Dated:
COMPUTERSHARE TRUST COMPANY, N.A., as Registrar
By: _______________________________________ Name: Title:
REVERSE OF CERTIFICATE
Dividends on each share of Series W Preferred Stock shall be payable at the rate provided in the Certificate of Designations.
The shares of Series W Preferred Stock shall be redeemable at the option of the Company in the manner and in accordance with the terms set forth in the Certificate of Designations.
The Company shall furnish without charge to each holder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class or Series of share capital issued by the Company and the qualifications, limitations or restrictions of such preferences and/or rights.
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers the shares of Series W Preferred Stock evidenced hereby to:
___________________________________________________
___________________________________________________
(Insert assignee’s social security or taxpayer identification number, if any)
___________________________________________________
___________________________________________________
(Insert address and zip code of assignee)
and irrevocably appoints:
___________________________________________________
___________________________________________________
as agent to transfer the shares of Series W Preferred Stock evidenced hereby on the books of the Transfer Agent. The agent may substitute another to act for him or her.
Date:
Signature:
___________________________________________________
(Sign exactly as your name appears on the other side of this Certificate)
Signature Guarantee: ___________________________________________________
(Signature must be guaranteed by an “eligible guarantor institution” that is a bank, stockbroker, savings and loan association or credit union meeting the requirements of the Transfer Agent, which requirements include membership or participation in the Securities Transfer Agents Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Transfer Agent in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.)
CERTIFICATE OF DESIGNATIONS
OF
3.875% FIXED RATE RESET NONCUMULATIVE PREFERRED STOCK SERIES X
OF
CITIGROUP INC.
______________________________
pursuant to Section 151 of the
General Corporation Law of the State of Delaware
______________________________
Citigroup Inc., a Delaware corporation (the “Company”), hereby certifies that:
-
The Restated Certificate of Incorporation of the Company \(as amended through the date hereof, the “Certificate of Incorporation”\) fixes the total number of shares of all classes of capital stock that the Company shall have the authority to issue at six billion \(6,000,000,000\) shares of common stock, par value $0.01 per share, and thirty million \(30,000,000\) shares of preferred stock, par value $1.00 per share. -
The Certificate of Incorporation expressly grants to the Board of Directors of the Company \(the “Board of Directors”\) authority to provide for the issuance of the shares of preferred stock in series, and to establish from time to time the number of shares to be included in each such series and to fix the designation, powers, preferences and rights of the shares of each such series and the qualifications, limitations or restrictions thereof. -
Pursuant to the authority conferred upon a preferred stock committee \(the “Preferred Stock Committee”\) by the Board of Directors, the Preferred Stock Committee, by action duly taken on February 10, 2021, adopted resolutions \(i\) authorizing the issuance and sale of up to 92,000 shares of the Company’s preferred stock and \(ii\) approving this final form of Certificate of Designations of 3.875% Fixed Rate Reset Noncumulative Preferred Stock, Series X \(the “Series X Preferred Stock”\), establishing the number of shares to be included in this Series X Preferred Stock and fixing the designation, powers, preferences and rights of the shares of this Series X Preferred Stock and the qualifications, limitations or restrictions thereof as follows:
Section 1. Designation.
The designation of the series of preferred stock shall be “3.875% Fixed Rate Reset Noncumulative Preferred Stock, Series X”. Each share of Series X Preferred Stock shall be identical in all respects to every other share of Series X Preferred Stock.
Section 2. Number of Shares.
The number of authorized shares of Series X Preferred Stock shall be 92,000. That number from time to time may be increased (but not in excess of the total number of authorized shares of preferred stock) or decreased (but not below the number of shares of Series X Preferred Stock then outstanding) by further resolution duly adopted by the Board of Directors, the Preferred Stock Committee or any other duly authorized committee thereof and by the filing of a certificate pursuant to the provisions of the General Corporation Law of the State of Delaware stating that such increase or reduction, as the case may be, has been so authorized. The Company shall have the authority to issue fractional shares of Series X Preferred Stock.
Section 3. Definitions. As used herein with respect to Series X Preferred Stock:
“Appropriate Federal Banking Agency” means the “appropriate Federal banking agency” with respect to the Company as that term is defined in Section 3(q) of the Federal Deposit Insurance Act of 1950, as amended, or any successor provision.
“Board of Directors” has the meaning set forth in the recitals above.
“business day” means any weekday that is not a legal holiday in New York City and is not a day on which banking institutions in New York City are authorized or required by law or regulation to be closed.
“Calculation Agent” means the Transfer Agent acting in its capacity as calculation agent
for the Series X Preferred Stock, and its successors and assigns.
“Common Stock” means the common stock of the Company, par value $0.01 per share, or any other shares of the capital stock of the Company into which such shares of common stock shall be reclassified or changed.
“Depositary” means DTC or its nominee or any successor depositary appointed by the Company.
“dividend payment date” shall have the meaning set forth in Section 4(a) hereof.
“dividend period” shall have the meaning set forth in Section 4(a) hereof.
“Dividend Record Date” shall have the meaning set forth in Section 4(a) hereof.
“DTC” means The Depository Trust Company.
“First Reset Date” shall have the meaning set forth in Section 4(a) hereof.
“Holder” means the Person in whose name the shares of the Series X Preferred Stock are registered, which may be treated by the Company, Calculation Agent, Transfer Agent, Registrar and paying agent as the absolute owner of the shares of Series X Preferred Stock for the purpose of making payment and for all other purposes.
“Junior Stock” means the Common Stock and any other class or series of stock of the
Company now existing or hereafter authorized over which Series X Preferred Stock has
preference or priority in the payment of dividends or in the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the Company.
“Nonpayment” shall have the meaning set forth in Section 7(b)(i) hereof.
“NY Federal Reserve’s website” shall have the meaning set forth in Section 4(a) hereof.
“Officer” means the Chief Executive Officer, the Chairman, the Chief Administrative Officer, any Vice Chairman, the Chief Financial Officer, the Controller, the Chief Accounting Officer, the Treasurer, any Deputy Treasurer, any Assistant Treasurer, any Vice President, the General Counsel and Corporate Secretary and any Assistant Secretary of the Company.
“Person” means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint-stock company, limited liability company, trust, or other entity.
“Preferred Stock Director” shall have the meaning set forth in Section 7(b)(i) hereof.
“Preferred Stock Director Termination Date” shall have the meaning set forth in Section 7(b)(iv) hereof.
“Registrar” means the Transfer Agent acting in its capacity as registrar for the Series X Preferred Stock, and its successors and assigns.
“Regulatory Capital Event” means the good faith determination by the Company that, as a result of (i) any amendment to, clarification of, or change in, the laws or regulations of the United States (including, for the avoidance of doubt, any agency or instrumentality of the United States, including the Federal Reserve and other federal bank regulatory agencies) or any political subdivision of or in the United States that is enacted or becomes effective after the initial issuance of any share of the Series X Preferred Stock, (ii) any proposed change in those laws or regulations that is announced or becomes effective after the initial issuance of any share of the Series X Preferred Stock, or (iii) any official administrative decision or judicial decision or administrative action or other official pronouncement interpreting or applying those laws or regulations or policies with respect thereto that is announced after the initial issuance of any share of the Series X Preferred Stock, there is more than an insubstantial risk that the Company will not be entitled to treat the full liquidation preference amount of $25,000 per share of the Series X Preferred Stock then outstanding as “tier 1 capital” (or its equivalent) for purposes of the capital adequacy guidelines of the Federal Reserve (or, as and if applicable, the capital adequacy guidelines or regulations of any successor Appropriate Federal Banking Agency) as then in effect and applicable, for so long as any share of the Series X Preferred Stock is outstanding.
“Relevant Governmental Body” shall have the meaning set forth in Section 4(a) hereof.
“reset date” means the First Reset Date and each date falling on the fifth anniversary of the preceding reset date, and no reset date, including the First Reset Date, will be adjusted for business days.
“reset dividend determination date” means, in respect of any reset period, the day that is three business days prior to the beginning of such reset period.
“reset period” means the period from, and including, each reset date to, but excluding, the next succeeding reset date, except for the initial reset period, which will be the period from, and including, the First Reset Date to, but excluding, the next succeeding reset date.
“Series X Liquidation Preference” shall have the meaning set forth in Section 5(a) hereof.
“Series X Preferred Stock” shall have the meaning set forth in Section 1 hereof.
“Series X Preferred Stock Certificate” shall have the meaning set forth in Section 14(a) hereof.
“Transfer Agent” means Computershare Trust Company, N.A., a federally chartered national association, acting as Transfer Agent, Calculation Agent, Registrar and paying agent for the Series X Preferred Stock, and its successors and assigns.
“Trust” shall have the meaning set forth in Section 6(d).
Section 4. Dividends.
a.Rate. Holders shall be entitled to receive, when, as and if declared by the Board of Directors or any duly authorized committee thereof, but only out of funds legally available therefor, noncumulative cash dividends on each share of Series X Preferred Stock in the amounts specified below in this Section 4, and no more, payable on the 18th of each February, May, August and November (each, a “dividend payment date”), (i) quarterly in arrears from, and including, the date of issuance to, but excluding, February 18, 2026 (the “First Reset Date”), at an annual rate of 3.875% on the liquidation preference of $25,000 per share, beginning on May 18, 2021, and (ii) from, and including the First Reset Date, for each reset period, at an annual rate equal to the five-year treasury rate as of the most recent reset dividend determination date (as described below) plus 3.417% on the liquidation preference of $25,000 per share, quarterly in arrears, beginning on May 18, 2026.
The record date for payment of dividends on the Series X Preferred Stock will be the record date fixed by the Board of Directors or any other duly authorized committee thereof that is not more than 30 nor less than 10 days prior to such dividend payment date (each, a “Dividend Record Date”). Any such day that is a Dividend Record Date will be a Dividend Record Date whether or not such day is a business day.
For any reset period beginning on or after the First Reset Date, the five-year treasury rate will be:
• The average of the yields on actively traded U.S. treasury securities adjusted to constant maturity, for five-year maturities, for the five business days appearing under the caption “Treasury Constant Maturities’’ in the most recently published statistical release designated H.15 Daily Update or any successor publication which is published by the Federal Reserve Board as of 5:00 p.m. (Eastern Time) as of any date of determination, as determined by the Calculation Agent in its sole discretion.
• If no calculation is provided as described above, then the Company (or such affiliate) will use a substitute or successor rate that it has determined, in its sole discretion after consulting any source it deems to be reasonable, is (i) the industry-accepted substitute or successor for the five-year treasury rate or (ii) if there is no such industry-accepted substitute or successor for the five-year treasury rate, a substitute or successor rate that is most comparable to the five-year treasury rate. Upon selection of a substitute or
successor rate, the Company (or such affiliate) may determine, in its sole discretion after consulting any source it deems to be reasonable, the day count convention, the business day convention, the definition of business day, the reset dividend determination date and any other relevant methodology or definition for calculating such substitute or successor rate, including
any adjustment factor it determines is needed to make such substitute or successor rate comparable to the five-year treasury rate, in a manner that is consistent with any industry-accepted practices for such substitute or successor rate.
The five-year treasury rate will be determined on each reset dividend determination date.
With respect to any dividend period, any dividends on the Series X Preferred Stock will be calculated on the basis of a 360-day year of twelve 30-day months, and “dividend period” means the period from, and including, each dividend payment date to, but excluding, the next succeeding dividend payment date, except for the initial dividend period, which will be the period from, and including, the date of issuance of the Series X Preferred Stock to, but excluding, the first dividend payment date. In the event that any dividend payment date is not a business day, then payment of any dividend payable on such date will be made on the next succeeding business day and without any additional dividend accrual or other payment in respect of any such postponement.
Any determination, decision or election that may be made by the Company (or one of its affiliates) pursuant to the provisions described above, including any determination with respect to tenor, rate or adjustment or of the occurrence or non-occurrence of an event, circumstance or date and any decision to take or refrain from taking any action or any selection, will be conclusive and binding absent manifest error, will be made in the Company’s (or such affiliate’s) sole discretion, and, notwithstanding anything to the contrary in this Certificate of Designations, shall become effective without consent from the holders of the Series X Preferred Stock or any other party.
All percentages resulting from any calculation of the dividend rate will be rounded, if necessary, to the nearest 1/100,000 of 1% (.0000001), with five one-millionths of a percentage point rounded upward. All currency amounts used in, or resulting from, the calculation on the Series X Preferred Stock will be rounded to the nearest one-hundredth of a unit. For purposes of rounding, .005 of a unit shall be rounded upward.
(b) Noncumulative Dividends. If the Board of Directors or any duly authorized committee thereof does not declare a dividend on the Series X Preferred Stock for any dividend period prior to the related dividend payment date, that dividend will not accrue, and the Company will have no obligation to pay, and Holders shall have no right to receive, a dividend for that dividend period on the related dividend payment date or at any future time, whether or not dividends on the Series X Preferred Stock or any other series of preferred stock or common stock are declared for any subsequent period. References herein to the “accrual” of dividends refer only to the determination of the amount of such dividend and do not imply that any right to a dividend arises prior to the date on which a dividend is declared.
(c) Priority of Dividends. So long as any share of Series X Preferred Stock remains outstanding, unless as to a dividend payment date full dividends on all outstanding shares of the Series X Preferred Stock have been declared and paid or declared and a sum sufficient for the payment of those dividends has been set aside for the dividend period then ending, the Company
will not, and will cause its subsidiaries not to, during the next succeeding dividend period, declare or pay any dividend on, make any distributions relating to, or redeem, purchase, acquire or make a liquidation payment relating to, any Junior Stock, or make any guarantee payment with respect thereto, other than:
(i) purchases, redemptions or other acquisitions of shares of Junior Stock in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of employees, officers, directors or consultants;
(ii) purchases of shares of Common Stock pursuant to a contractually binding requirement to buy stock existing prior to the commencement of the then-current dividend period, including under a contractually binding stock repurchase plan;
(iii) as a result of an exchange or conversion of any class or series of Junior Stock for any other class or series of Junior Stock;
(iv) the purchase of fractional interests in shares of Junior Stock pursuant to the conversion or exchange provisions of such Junior Stock or the security being converted or exchanged;
(v) the purchase of Junior Stock by an investment banking subsidiary of the Company in connection with the distribution thereof; or
(vi) the purchase of Junior Stock by any investment banking subsidiary of the Company in connection with market-making or other secondary market activities in the ordinary course of the business of such subsidiary.
The restrictions set forth in the preceding provisions of this Section 4(c) shall not apply to any Junior Stock dividends paid by the Company where the dividend is in the form of the same stock (or the right to buy the same stock) as that on which the dividend is being paid.
Except as provided below, for so long as any share of Series X Preferred Stock remains outstanding, if dividends are not declared and paid in full upon the shares of Series X Preferred Stock and any class or series of stock of the Company now existing or hereafter authorized that ranks equally with the Series X Preferred Stock in the payment of dividends, all dividends declared upon shares of Series X Preferred Stock and such other stock will be declared on a proportional basis so that the amount of dividends declared per share will bear to each other the same ratio that accrued dividends for the then-current dividend period per share of Series X Preferred Stock and accrued dividends for the then-current dividend period per share of such other stock (including, in the case of any such other stock that bears cumulative dividends, all accrued and unpaid dividends) bear to each other.
Subject to the foregoing, and not otherwise, such dividends payable in cash, stock or otherwise, as may be determined by the Board of Directors or any duly authorized committee thereof, may be declared and paid on any other class or series of stock of the Company from time to time out of any funds legally available for such payment, and Holders will not be entitled to participate in those dividends.
Section 5. Liquidation Rights.
(a) Liquidation. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company, Holders shall be entitled, out of funds legally available therefor, before any distribution or payment may be made by the Company or set aside for the holders of any Junior Stock and subject to the rights of the holders of any class or series of stock ranking senior to or on parity with Series X Preferred Stock upon liquidation and the rights of the Company’s depositors and other creditors, to receive in full a liquidating distribution in the amount of the liquidation preference of $25,000 per share (the “Series X Liquidation Preference”), plus any accrued dividends thereon from the last dividend payment date to, but excluding, the date of the liquidation, dissolution or winding up if and to the extent declared but not yet paid. Holders shall not be entitled to any further payments in the event of any such voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company other than what is expressly provided for in this Section 5.
(b) Partial Payment. If the assets of the Company are not sufficient to pay in full the aforesaid liquidation distributions to the Holders and any liquidation distributions owed to holders of any class or series of stock of the Company ranking equally with the Series X Preferred Stock in the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the Company, the amounts paid to the Holders and to the holders of all such equally ranking stock shall be pro rata in accordance with the respective aggregate liquidating distributions to which they would otherwise be entitled.
(c) Merger, Consolidation and Sale of Assets Not Liquidation. For purposes of this Section 5, the sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the property and assets of the Company shall not be deemed a voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, nor shall the merger, consolidation or any other business combination transaction of the Company into or with any other corporation or Person or the merger, consolidation or any other business combination transaction of any other corporation or Person into or with the Company be deemed to be a voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company.
Section 6. Redemption.
(a) Optional Redemption. The Company, at the option of its Board of Directors or any duly authorized committee thereof, may redeem out of funds legally available therefor, (i) in whole at any time or in part, from time to time, the shares of Series X Preferred Stock at the time outstanding, on any dividend payment date beginning on or after the First Reset Date, or (ii) in whole but not in part at any time within 90 days following a Regulatory Capital Event, in each case at a redemption price equal to $25,000 per share plus any declared and unpaid dividends, without accumulation of any undeclared dividends, to, but excluding, the redemption date, upon notice given as provided in Section 6(b) below.
(b) Notice of Redemption. Notice of every redemption of shares of Series X Preferred Stock shall be mailed by first class mail, postage prepaid, addressed to the Holders of such shares to be redeemed at their respective last addresses appearing on the stock register of the Company.
Such mailing shall be at least 5 days and not more than 30 days before the date fixed for redemption. Any notice mailed as provided in this Section 6(b) shall be conclusively presumed to have been duly given, whether or not the Holder receives such notice, but failure duly to give such notice by mail, or any defect in such notice or in the mailing thereof, to any Holder of shares of Series X Preferred Stock designated for redemption shall not affect the validity of the proceedings for the redemption of any other shares of Series X Preferred Stock. Each notice shall state:
(i) the redemption date;
(ii) the total number of shares of Series X Preferred Stock to be redeemed and, if fewer than all the shares of a Holder are to be redeemed, the number of such shares to be redeemed;
(iii) the redemption price;
(iv) the place or places where the certificates for such shares are to be surrendered for payment of the redemption price, if applicable; and
(v) that dividends on the shares to be redeemed will cease to accrue on the redemption date.
Notwithstanding the foregoing, if the certificates evidencing the shares of Series X Preferred Stock are held of record by a depositary and any related depository shares are held of record by a Depositary or its nominee, the Company may give such notice in any manner permitted by the Depositary.
(c) Partial Redemption. In case of any redemption of only part of the shares of Series X Preferred Stock at the time outstanding, the shares of Series X Preferred Stock to be redeemed shall be selected (i) pro rata from the Holders in proportion to the number of shares of Series X Preferred Stock held by such Holders, (ii) by lot or (iii) in such other manner as the Board of Directors or any duly authorized committee thereof may determine, in its sole discretion, to be fair and equitable. Subject to the provisions of this Section 6, the Board of Directors or any duly authorized committee thereof shall have full power and authority to prescribe the terms and conditions upon which shares of Series X Preferred Stock shall be redeemed from time to time.
(d) Effectiveness of Redemption. If notice of redemption has been duly given and if on or before the redemption date specified in the notice all funds necessary for the redemption have been set aside by the Company, separate and apart from its other assets, for the pro rata benefit of the Holders of the shares called for redemption, so as to be and continue to be available therefor, or deposited by the Company with a bank or trust company selected by the Board of Directors or any duly authorized committee thereof (the “Trust”) in trust for the pro rata benefit of the Holders of the shares called for redemption, then, notwithstanding that any certificate for any share so called for redemption has not been surrendered for cancellation, on and after the redemption date all shares so called for redemption shall cease to be outstanding, all dividends with respect to such shares shall cease to accrue on such redemption date, and all rights with respect to such shares shall forthwith on such redemption date cease and terminate, except only
the right of the Holders thereof to receive the amount payable on such redemption from the Trust at any time after the redemption date from the funds so deposited, without interest. The Company shall be entitled to receive, from time to time, from the Trust any interest accrued on such funds, and the Holders of any shares called for redemption shall have no claim to any such interest. Any funds so deposited and unclaimed at the end of three years from the redemption date shall, to the extent permitted by law, be released or repaid to the Company, and in the event of such repayment to the Company, the Holders of the shares so called for redemption shall be deemed to be unsecured creditors of the Company for an amount equivalent to the amount deposited as stated above for the redemption of such shares and so repaid to the Company, but shall in no event be entitled to any interest.
Section 7. Voting Rights.
(a) General. The Holders shall not be entitled to vote on any matter except as set forth in Section 7(b) below or as required by the Delaware General Corporation Law.
(b) Special Voting Right.
(i) Voting Right. If and whenever dividends on the Series X Preferred Stock or any other class or series of preferred stock that ranks on parity with the Series X Preferred Stock as to payment of dividends and upon which voting rights equivalent to those granted by this Section 7(b)(i) have been conferred and are exercisable (any such class or series being referred to herein as “dividend parity stock”) have not been declared and paid in an aggregate amount equal, as to any class or series, to at least three semi-annual or six quarterly dividend periods, as applicable, (whether consecutive or not) (a “Nonpayment”), the authorized number of directors constituting the Board of Directors shall be increased by two, and the Holders, together with holders of dividend parity stock, shall have the right, voting separately as a single class without regard to class or series (and with voting rights allocated pro rata based on the liquidation preference of each such class or series), to the exclusion of the holders of Common Stock, to elect two directors of the Company to fill such newly created directorships (and to fill any vacancies in the terms of such directorships), provided that it shall be a qualification for election of any such director that the election of such director shall not cause the Company to violate the corporate governance requirements of the New York Stock Exchange (or other exchange on which the Company’s securities may be listed) that listed companies must have a majority of independent directors and further provided that the Board of Directors shall at no time include more than two such directors. Each such director elected by the Holders together with holders of dividend parity stock is a “Preferred Stock Director.”
(ii) Election. The election of the Preferred Stock Directors will take place at any annual meeting of stockholders or any special meeting of the Holders and any dividend parity stock, called as provided herein. At any time after the special voting power has vested pursuant to Section 7(b)(i) above, the secretary of the Company may, and upon the written request (addressed to the secretary at the Company’s principal office) of the holders of at least 20% of the voting power of the Series X Preferred Stock or the holders of at least 20% of the voting power of any series of dividend parity stock then outstanding (with such voting power measured based on the voting power to elect Preferred Stock Directors), must (unless such request is
received less than 90 days before the date fixed for the next annual or special meeting of the stockholders of the Company, in which event such election shall be held at such next annual or special meeting of stockholders), call a special meeting of the holders of Series X Preferred Stock and any dividend parity stock for the purposes of electing Preferred Stock Directors. The Preferred Stock Directors shall each be entitled to one vote per director on any matter.
(iii) Notice of Special Meeting. Notice for a special meeting to elect Preferred Stock Directors will be given in a similar manner to that provided in the Company’s by-laws for a special meeting of the stockholders. If the secretary of the Company does not call a special meeting within 20 days after receipt of any such request, then any Holder may (at the expense of the Company) call such meeting, upon notice as provided in this Section 7(b)(iii), and for that purpose will have access to the stock register of the Company. The Preferred Stock Directors elected at any such special meeting and each Preferred Stock Director elected at a subsequent annual or special meeting of stockholders, will be elected for term expiring upon the earlier of the Preferred Stock Director Termination Date and the next annual meeting of stockholders following such Preferred Stock Director's election. In case any vacancy in the office of a Preferred Stock Director occurs (other than prior to the initial election of the Preferred Stock Directors), the vacancy may be filled by the Preferred Stock Director remaining in office, or if none remains in office, by a plurality of the votes cast by the holders of Series X Preferred Stock and any dividend parity stock, voting together as a single class, and the Preferred Stock Director so appointed or elected to fill such vacancy shall serve for a term expiring at the next annual meeting of the stockholders. Preferred Stock Directors may only be elected by the holders of Series X Preferred Stock and dividend parity stock in accordance with this Section 7. If the holders of Series X Preferred Stock and such dividend parity stock fail to elect a sufficient number of directors to fill all directorships for which they are entitled to elect directors pursuant to this Section 7, then any directorship not so filled shall remain vacant until such time as the holders of Series X Preferred Stock and such dividend parity stock elect a person to fill such directorship in accordance with this Section 7, or such vacancy is otherwise filled in accordance with this Section 7; and no such directorship may be filled by stockholders of the Company other than in accordance with this Section 7.
(iv) Termination; Removal. Whenever the Company has paid noncumulative dividends in full for at least two consecutive semi-annual or four consecutive quarterly dividend periods following a Nonpayment on the Series X Preferred Stock and on any dividend parity stock entitled to noncumulative dividends and has paid cumulative dividends in full on any dividend parity stock entitled to cumulative dividends, then the right of the Holders to elect the Preferred Stock Directors will cease (but subject always to the same provisions for the vesting of the special voting rights in the case of any similar non-payment of dividends in respect of future dividend periods) (the time of such cessation, the “Preferred Stock Director Termination Date”). Upon a Preferred Stock Director Termination Date, the terms of office of the Preferred Stock Directors will immediately terminate, the persons then serving as Preferred Stock Directors shall immediately cease to be qualified to hold office as Preferred Stock Directors, the Preferred Stock Directors shall cease to be directors of the Company and the number of directors constituting the Board of Directors shall be automatically reduced, without any action by the Board of Directors or the stockholders of the Company, by the number of Preferred Stock Directors authorized immediately prior to such termination. Any Preferred Stock Director may be removed at any time without cause by the holders of a majority of the voting power of outstanding shares of the
capital stock then entitled to vote in the election of Preferred Stock Directors, voting together as a single class (with such voting power measured based on the voting power to elect Preferred Stock Directors).
(c) Senior Issuances; Adverse Changes. So long as any shares of Series X Preferred Stock are outstanding, but subject to the final paragraph of this Section 7(c), in addition to any other vote or consent of holders of the Company’s capital stock required by Delaware law, the vote or consent of the holders of at least two-thirds of the voting power of the Series X Preferred Stock and the holders of any other preferred stock entitled to vote thereon, voting together as a single class, given in person or by proxy at an annual or special meeting of stockholders, or given in writing without a meeting, will be necessary for effecting or validating any of the following actions, whether or not such approval is required by Delaware law:
(i) any amendment, alteration or repeal of any provision of the Company’s certificate of incorporation (including the certificate of designations creating the Series X Preferred Stock) or the Company’s by-laws that would alter or change the voting powers, preferences, economic rights or special rights of the Series X Preferred Stock so as to affect them adversely;
(ii) any amendment or alteration of the Company’s certificate of incorporation to authorize or create, or increase the authorized amount of, any shares of, or any securities convertible into shares of, any class or series of the Company's capital stock ranking prior to the Series X Preferred Stock in the payment of dividends or in the distribution of assets on any liquidation, dissolution, or winding up of the Company; or
(iii) the consummation of a binding share exchange or reclassification involving the Series X Preferred Stock or a merger or consolidation of the Company with another entity, except that holders of Series X Preferred Stock will have no right to vote under this provision or otherwise under Delaware law if in each case (i) the Series X Preferred Stock remains outstanding or, in the case of any such merger or consolidation with respect to which the Company is not the surviving or resulting entity, is converted into or exchanged for preferred securities of the surviving or resulting entity or its ultimate parent, that is an entity organized and existing under the laws of the United States of America, any state thereof or the District of Columbia and that is a corporation for U.S. federal income tax purposes (or if such entity is not a corporation, the Company having received an opinion of nationally recognized counsel experienced in such matters to the effect that Holders will be subject to tax for U.S. federal income tax purposes with respect to such new preferred securities after such merger or consolidation in the same amount, at the same time and otherwise in the same manner as would have been the case under the Series X Preferred Stock prior to such merger or consolidation), and (ii) such Series X Preferred Stock remaining outstanding or such preferred securities, as the case may be, have such rights, preferences, privileges and voting powers, taken as a whole, as are not materially less favorable to the holders thereof than the rights, preferences, privileges and voting powers of the Series X Preferred Stock, taken as a whole;
provided, however, that, for the avoidance of doubt, any increase in the amount of the authorized or issued Series X Preferred Stock or authorized preferred stock or any securities convertible into preferred stock or the creation and issuance, or an increase in the authorized or issued amount, of other series of preferred stock or any securities convertible into preferred stock ranking equally with and/or junior to the Series X Preferred Stock with respect to the payment of
dividends (whether such dividends are cumulative or noncumulative) and/or the distribution of assets upon the Company’s liquidation, dissolution or winding up will not be deemed to adversely affect the voting powers, preferences or special rights of the Series X Preferred Stock, and no stockholder will have the right to vote on such an increase, creation or issuance by reason of this Section 7.
If any amendment, alteration, repeal, share exchange, reclassification, merger or consolidation specified in this Section 7(c) would adversely affect one or more but not all series of preferred stock of the Company, then only such series of preferred stock as are adversely affected by and entitled to vote on the matter shall vote on the matter together with the Series X Preferred Stock as a single class (in lieu of all other series of preferred stock) for purposes of the vote or consent required by this Section 7(c).
(d) No Vote if Redemption. No vote or consent of the Holders shall be required pursuant to Section 7(b) or 7(c) if, at or prior to the time when the act with respect to such vote or consent would otherwise be required shall be effected, the Company shall have redeemed or shall have called for redemption all outstanding shares of Series X Preferred Stock, with proper notice and sufficient funds having been set aside for such redemption, in each case pursuant to Section 6 above.
Section 8. Preemption and Conversion Rights.
The Holders shall not have any preemptive rights or conversion rights as a result of the terms hereof.
Section 9. Rank.
For the avoidance of doubt, the Board of Directors or any duly authorized committee thereof may, without the vote of the Holders, authorize and issue additional shares of Junior Stock or shares of any class or series of stock of the Company now existing or hereafter authorized that ranks equally with the Series X Preferred Stock in the payment of dividends or in the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the Company.
Section 10. Reacquired Shares.
The Board of Directors shall take such actions as are necessary to cause the shares of Series X Preferred Stock which have been redeemed or otherwise purchased or acquired by the Company to be retired and restored to the status of authorized but unissued shares of preferred stock without designation as to series.
Section 11. No Sinking Fund.
Shares of Series X Preferred Stock are not subject to the operation of a sinking fund.
Section 12. Transfer Agent, Calculation Agent, Registrar and Paying Agent.
The duly appointed Transfer Agent, Calculation Agent, Registrar and paying agent for the Series X Preferred Stock shall be Computershare Trust Company, N.A. The Company may, in its sole discretion, remove the Transfer Agent and/or the Calculation Agent in accordance with the agreements between the Company and the Transfer Agent; provided, however, that the Company shall appoint a successor transfer agent and/or calculation agent who shall accept such appointment prior to the effectiveness of such removal. Upon any such removal or appointment, the Company shall send notice thereof by first-class mail, postage prepaid, to the Holders.
Section 13. Replacement Certificates for Mutilated, Destroyed, Stolen and Lost Certificates.
If physical certificates are issued, the Company shall replace any mutilated certificate at the Holder’s expense upon surrender of that certificate to the Transfer Agent. The Company shall replace certificates that become destroyed, stolen or lost at the Holder’s expense upon delivery to the Company and the Transfer Agent of satisfactory evidence that the certificate has been destroyed, stolen or lost, together with any indemnity that may be required by the Transfer Agent and the Company.
Section 14. Form.
(a) Series X Preferred Stock Certificates. Series X Preferred Stock shall be issued in certificated form in substantially the form attached hereto as Exhibit A (each, a “Series X Preferred Stock Certificate”). Exhibit A is hereby incorporated in and expressly made a part of this Certificate of Designations. The Series X Preferred Stock Certificates may have notations, legends or endorsements required by law, stock exchange rules, agreements to which the Company is subject, if any, or usage (provided that any such notation, legend or endorsement is in a form acceptable to the Company).
(b) Signature. Two Officers shall sign any Series X Preferred Stock Certificate for the Company, in accordance with the Company’s by-laws and applicable law, by manual or facsimile signature. If an Officer whose signature is on a Series X Preferred Stock Certificate no longer holds that office at the time the Transfer Agent countersigned the Series X Preferred Stock Certificate, such Series X Preferred Stock Certificate shall be valid nevertheless. A Series X Preferred Stock Certificate shall not be valid until an authorized signatory of the Transfer Agent manually countersigns such Series X Preferred Stock Certificate. Each Series X Preferred Stock Certificate shall be dated the date of its countersignature.
Section 15. Taxes.
(a) Transfer Taxes. The Company shall pay any and all stock transfer, documentary, stamp and similar taxes that may be payable in respect of any issuance or delivery of shares of Series X Preferred Stock. The Company shall not, however, be required to pay any such tax that
may be payable in respect of any transfer involved in the issuance or delivery of shares of Series X Preferred Stock, in a name other than that in which the shares of Series X Preferred Stock were registered, or in respect of any payment to any Person other than a payment to the registered holder thereof, and shall not be required to make any such issuance, delivery or payment unless and until the Person otherwise entitled to such issuance, delivery or payment has paid to the Company the amount of any such tax or has established, to the satisfaction of the Company, that such tax has been paid or is not payable.
(b) Withholding. All payments and distributions (or deemed distributions) on the shares of Series X Preferred Stock shall be subject to withholding and backup withholding of tax to the extent required by law, subject to applicable exemptions, and amounts withheld, if any, shall be treated as received by Holders.
Section 16. Notices.
All notices referred to herein shall be in writing, and, unless otherwise specified herein, all notices hereunder shall be deemed to have been given upon the earlier of receipt thereof or three business days after the mailing thereof if sent by registered or certified mail (unless first class mail shall be specifically permitted for such notice under the terms of this Certificate of Designations) with postage prepaid, addressed: (i) if to the Company, to its office at 388 Greenwich Street, New York, New York 10013 (Attention: Corporate Secretary) or to the Transfer Agent at its office at 150 Royall Street, Canton, Massachusetts 02021, or other agent of the Company designated as permitted by this Certificate of Designations, or (ii) if to any Holder, to such Holder at the address of such Holder as listed in the stock record books of the Company (which may include the records of the Transfer Agent) or (iii) to such other address as the Company or any such Holder, as the case may be, shall have designated by notice similarly given.
Section 17. Other Rights Disclaimed.
The shares of Series X Preferred Stock have no voting powers, preferences or relative, participating, optional or other special rights, or qualifications, limitations or restrictions thereof, other than as set forth herein or in the Certificate of Incorporation of the Company.
IN WITNESS WHEREOF, this Certificate of Designations has been executed on behalf of the Company by its Treasurer this 17th day of February, 2021.
CITIGROUP INC.
By: _/s/ Michael Verdeschi_______________________
Name: Michael Verdeschi
Title: Treasurer
Exhibit A
FORM OF 3.875% FIXED RATE RESET NONCUMULATIVE PREFERRED STOCK, SERIES X
Certificate Number_______ Number of Shares of Series X Preferred Stock______
CUSIP NO.:
CITIGROUP INC.
3.875% Fixed Rate Reset Noncumulative Preferred Stock, Series X
(par value $1.00 per share) (liquidation preference $25,000 per share)
Citigroup Inc., a Delaware corporation (the “Company”), hereby certifies that [ ] (the “Holder”) is the registered owner of [ ] fully paid and non-assessable shares of the Company’s designated 3.875% Fixed Rate Reset Noncumulative Preferred Stock, Series X, with a par value of $1.00 per share and a liquidation preference of $25,000 per share (the “Series X Preferred Stock”). The shares of Series X Preferred Stock are transferable on the books and records of the Registrar, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer. The designations, rights, privileges, restrictions, preferences and other terms and provisions of the Series X Preferred Stock represented hereby are and shall in all respects be subject to the provisions of the Certificate of Designations dated February 17, 2021 as the same may be amended from time to time (the “Certificate of Designations”). Capitalized terms used herein but not defined shall have the meaning given them in the Certificate of Designations. The Company will provide a copy of the Certificate of Designations to a Holder without charge upon written request to the Company at its principal place of business.
Reference is hereby made to select provisions of the Series X Preferred Stock set forth on the reverse hereof, and to the Certificate of Designations, which select provisions and the Certificate of Designations shall for all purposes have the same effect as if set forth at this place.
Upon receipt of this certificate, the Holder is bound by the Certificate of Designations and is entitled to the benefits thereunder.
Unless the Registrar has properly countersigned, these shares of Series X Preferred Stock shall not be entitled to any benefit under the Certificate of Designations or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, this certificate has been executed on behalf of the Company by its [Title] and by its [Title] this __ day of _______, ________.
CITIGROUP INC.
By: _______________________________________ Name: Title:
By: _______________________________________ Name: Title:
REGISTRAR’S COUNTERSIGNATURE
These are shares of Series X Preferred Stock referred to in the within-mentioned Certificate of Designations.
Dated:
COMPUTERSHARE TRUST COMPANY, N.A., as Registrar
By: _______________________________________ Name: Title:
REVERSE OF CERTIFICATE
Dividends on each share of Series X Preferred Stock shall be payable at the rate provided in the Certificate of Designations.
The shares of Series X Preferred Stock shall be redeemable at the option of the Company in the manner and in accordance with the terms set forth in the Certificate of Designations.
The Company shall furnish without charge to each holder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class or Series of share capital issued by the Company and the qualifications, limitations or restrictions of such preferences and/or rights.
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers the shares of Series X Preferred Stock evidenced hereby to:
___________________________________________________
___________________________________________________
(Insert assignee’s social security or taxpayer identification number, if any)
___________________________________________________
___________________________________________________
(Insert address and zip code of assignee)
and irrevocably appoints:
___________________________________________________
___________________________________________________
as agent to transfer the shares of Series X Preferred Stock evidenced hereby on the books of the Transfer Agent. The agent may substitute another to act for him or her.
Date:
Signature:
___________________________________________________
(Sign exactly as your name appears on the other side of this Certificate)
Signature Guarantee: ___________________________________________________
(Signature must be guaranteed by an “eligible guarantor institution” that is a bank, stockbroker, savings and loan association or credit union meeting the requirements of the Transfer Agent, which requirements include membership or participation in the Securities Transfer Agents Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Transfer Agent in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.)
CERTIFICATE OF RETIREMENT
OF PREFERRED STOCK
OF CITIGROUP INC.
(Pursuant to Section 243 of the General
Corporation Law of the State of Delaware)
CITIGROUP INC., a corporation duly organized and existing under the General Corporation Law of the State of Delaware, certifies as follows:
FIRST: Citigroup's Restated Certificate of Incorporation, as amended (the "Certificate of Incorporation"), authorizes the issuance of 41,400 shares of 6.300% Non-Cumulative Preferred Stock, Series S (the "Preferred Stock, Series S"), each such share with $1.00 par value and a stated value of $25,000 per share.
SECOND: Citigroup has retired all of the authorized shares of the Preferred Stock, Series S.
THIRD: Pursuant to the provisions of Section 243 of the General Corporation Law of the State of Delaware, the shares that were designated to Preferred Stock, Series S are hereby returned to the status of authorized but unissued shares of the Preferred Stock of Citigroup Inc.
IN WITNESS WHEREOF, CITIGROUP INC. has caused this certificate to be signed by the below duly authorized Assistant Treasurer this 18th day of February, 2021.
CITIGROUP INC.
By: /s/ Elissa Steinberg______________
Elissa Steinberg
Assistant Treasurer
CERTIFICATE OF RETIREMENT
OF PREFERRED STOCK
OF CITIGROUP INC.
(Pursuant to Section 243 of the General
Corporation Law of the State of Delaware)
CITIGROUP INC., a corporation duly organized and existing under the General Corporation Law of the State of Delaware, certifies as follows:
FIRST: Citigroup's Restated Certificate of Incorporation, as amended (the "Certificate of Incorporation"), authorizes the issuance of 50,000 shares of 5.950% Non-Cumulative Preferred Stock, Series Q (the "Preferred Stock, Series Q"), each such share with $1.00 par value and a stated value of $25,000 per share.
SECOND: Citigroup has retired all of the authorized shares of the Preferred Stock, Series Q.
THIRD: Pursuant to the provisions of Section 243 of the General Corporation Law of the State of Delaware, the shares that were designated to Preferred Stock, Series Q are hereby returned to the status of authorized but unissued shares of the Preferred Stock of Citigroup Inc.
IN WITNESS WHEREOF, CITIGROUP INC. has caused this certificate to be signed by the below duly authorized Assistant Treasurer this 19th day of May, 2021.
CITIGROUP INC.
By: _ /s/ Elissa Steinberg______
Elissa Steinberg
Assistant Treasurer
CERTIFICATE OF RETIREMENT
OF PREFERRED STOCK
OF CITIGROUP INC.
(Pursuant to Section 243 of the General
Corporation Law of the State of Delaware)
CITIGROUP INC., a corporation duly organized and existing under the General Corporation Law of the State of Delaware, certifies as follows:
FIRST: Citigroup's Restated Certificate of Incorporation, as amended (the "Certificate of Incorporation"), authorizes the issuance of 60,000 shares of 6.125% Fixed Rate / Floating Rate Non-Cumulative Preferred Stock, Series R (the "Preferred Stock, Series R"), each such share with $1.00 par value and a stated value of $25,000 per share.
SECOND: Citigroup has retired all of the authorized shares of the Preferred Stock, Series R.
THIRD: Pursuant to the provisions of Section 243 of the General Corporation Law of the State of Delaware, the shares that were designated to Preferred Stock, Series R are hereby returned to the status of authorized but unissued shares of the Preferred Stock of Citigroup Inc.
IN WITNESS WHEREOF, CITIGROUP INC. has caused this certificate to be signed by the below duly authorized Assistant Treasurer this 19th day of May, 2021.
CITIGROUP INC.
By: _ /s/ Elissa Steinberg______
Elissa Steinberg
Assistant Treasurer
CERTIFICATE OF DESIGNATIONS
OF
4.150% FIXED RATE RESET NONCUMULATIVE PREFERRED STOCK SERIES Y
OF
CITIGROUP INC.
______________________________
pursuant to Section 151 of the
General Corporation Law of the State of Delaware
______________________________
Citigroup Inc., a Delaware corporation (the “Company”), hereby certifies that:
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The Restated Certificate of Incorporation of the Company \(as amended through the date hereof, the “Certificate of Incorporation”\) fixes the total number of shares of all classes of capital stock that the Company shall have the authority to issue at six billion \(6,000,000,000\) shares of common stock, par value $0.01 per share, and thirty million \(30,000,000\) shares of preferred stock, par value $1.00 per share. -
The Certificate of Incorporation expressly grants to the Board of Directors of the Company \(the “Board of Directors”\) authority to provide for the issuance of the shares of preferred stock in series, and to establish from time to time the number of shares to be included in each such series and to fix the designation, powers, preferences and rights of the shares of each such series and the qualifications, limitations or restrictions thereof. -
Pursuant to the authority conferred upon a preferred stock committee \(the “Preferred Stock Committee”\) by the Board of Directors, the Preferred Stock Committee, by action duly taken on October 20, 2021, adopted resolutions \(i\) authorizing the issuance and sale of up to 40,000 shares of the Company’s preferred stock and \(ii\) approving this final form of Certificate of Designations of 4.150% Fixed Rate Reset Noncumulative Preferred Stock, Series Y \(the “Series Y Preferred Stock”\), establishing the number of shares to be included in this Series Y Preferred Stock and fixing the designation, powers, preferences and rights of the shares of this Series Y Preferred Stock and the qualifications, limitations or restrictions thereof as follows:
Section 1. Designation.
The designation of the series of preferred stock shall be “4.150% Fixed Rate Reset Noncumulative Preferred Stock, Series Y”. Each share of Series Y Preferred Stock shall be identical in all respects to every other share of Series Y Preferred Stock.
Section 2. Number of Shares.
The number of authorized shares of Series Y Preferred Stock shall be 40,000. That number from time to time may be increased (but not in excess of the total number of authorized shares of preferred stock) or decreased (but not below the number of shares of Series Y Preferred Stock then outstanding) by further resolution duly adopted by the Board of Directors, the Preferred Stock Committee or any other duly authorized committee thereof and by the filing of a certificate pursuant to the provisions of the General Corporation Law of the State of Delaware stating that such increase or reduction, as the case may be, has been so authorized. The Company shall have the authority to issue fractional shares of Series Y Preferred Stock.
Section 3. Definitions. As used herein with respect to Series Y Preferred Stock:
“Appropriate Federal Banking Agency” means the “appropriate Federal banking agency” with respect to the Company as that term is defined in Section 3(q) of the Federal Deposit Insurance Act of 1950, as amended, or any successor provision.
“Board of Directors” has the meaning set forth in the recitals above.
“business day” means any weekday that is not a legal holiday in New York City and is not a day on which banking institutions in New York City are authorized or required by law or regulation to be closed.
“Calculation Agent” means the Transfer Agent acting in its capacity as calculation agent
for the Series Y Preferred Stock, and its successors and assigns.
“Common Stock” means the common stock of the Company, par value $0.01 per share, or any other shares of the capital stock of the Company into which such shares of common stock shall be reclassified or changed.
“Depositary” means DTC or its nominee or any successor depositary appointed by the Company.
“dividend payment date” shall have the meaning set forth in Section 4(a) hereof.
“dividend period” shall have the meaning set forth in Section 4(a) hereof.
“Dividend Record Date” shall have the meaning set forth in Section 4(a) hereof.
“DTC” means The Depository Trust Company.
“First Reset Date” shall have the meaning set forth in Section 4(a) hereof.
“Holder” means the Person in whose name the shares of the Series Y Preferred Stock are registered, which may be treated by the Company, Calculation Agent, Transfer Agent, Registrar and paying agent as the absolute owner of the shares of Series Y Preferred Stock for the purpose of making payment and for all other purposes.
“Junior Stock” means the Common Stock and any other class or series of stock of the
Company now existing or hereafter authorized over which Series Y Preferred Stock has
preference or priority in the payment of dividends or in the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the Company.
“Nonpayment” shall have the meaning set forth in Section 7(b)(i) hereof.
“NY Federal Reserve’s website” shall have the meaning set forth in Section 4(a) hereof.
“Officer” means the Chief Executive Officer, the Chairman, the Chief Administrative Officer, any Vice Chairman, the Chief Financial Officer, the Controller, the Chief Accounting
Officer, the Treasurer, any Deputy Treasurer, any Assistant Treasurer, any Vice President, the General Counsel and Corporate Secretary and any Assistant Secretary of the Company.
“Person” means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint-stock company, limited liability company, trust, or other entity.
“Preferred Stock Director” shall have the meaning set forth in Section 7(b)(i) hereof.
“Preferred Stock Director Termination Date” shall have the meaning set forth in Section 7(b)(iv) hereof.
“Registrar” means the Transfer Agent acting in its capacity as registrar for the Series Y Preferred Stock, and its successors and assigns.
“Regulatory Capital Event” means the good faith determination by the Company that, as a result of (i) any amendment to, clarification of, or change in, the laws or regulations of the United States (including, for the avoidance of doubt, any agency or instrumentality of the United States, including the Federal Reserve and other federal bank regulatory agencies) or any political subdivision of or in the United States that is enacted or becomes effective after the initial issuance of any share of the Series Y Preferred Stock, (ii) any proposed change in those laws or regulations that is announced or becomes effective after the initial issuance of any share of the Series Y Preferred Stock, or (iii) any official administrative decision or judicial decision or administrative action or other official pronouncement interpreting or applying those laws or regulations or policies with respect thereto that is announced after the initial issuance of any share of the Series Y Preferred Stock, there is more than an insubstantial risk that the Company will not be entitled to treat the full liquidation preference amount of $25,000 per share of the Series Y Preferred Stock then outstanding as “tier 1 capital” (or its equivalent) for purposes of the capital adequacy guidelines of the Federal Reserve (or, as and if applicable, the capital adequacy guidelines or regulations of any successor Appropriate Federal Banking Agency) as then in effect and applicable, for so long as any share of the Series Y Preferred Stock is outstanding.
“Relevant Governmental Body” shall have the meaning set forth in Section 4(a) hereof.
“reset date” means the First Reset Date and each date falling on the fifth anniversary of the preceding reset date, and no reset date, including the First Reset Date, will be adjusted for business days.
“reset dividend determination date” means, in respect of any reset period, the day that is three business days prior to the beginning of such reset period.
“reset period” means the period from, and including, each reset date to, but excluding, the next succeeding reset date, except for the initial reset period, which will be the period from, and including, the First Reset Date to, but excluding, the next succeeding reset date.
“Series Y Liquidation Preference” shall have the meaning set forth in Section 5(a) hereof.
“Series Y Preferred Stock” shall have the meaning set forth in Section 1 hereof.
“Series Y Preferred Stock Certificate” shall have the meaning set forth in Section 14(a) hereof.
“Transfer Agent” means Computershare Trust Company, N.A., a federally chartered national association, acting as Transfer Agent, Calculation Agent, Registrar and paying agent for the Series Y Preferred Stock, and its successors and assigns.
“Trust” shall have the meaning set forth in Section 6(d).
Section 4. Dividends.
a.Rate. Holders shall be entitled to receive, when, as and if declared by the Board of Directors or any duly authorized committee thereof, but only out of funds legally available therefor, noncumulative cash dividends on each share of Series Y Preferred Stock in the amounts specified below in this Section 4, and no more, payable on the 15th of each February, May, August and November (each, a “dividend payment date”), (i) quarterly in arrears from, and including, the date of issuance to, but excluding, November 15, 2026 (the “First Reset Date”), at an annual rate of 4.150% on the liquidation preference of $25,000 per share, beginning on February 15, 2022, and (ii) from, and including the First Reset Date, for each reset period, at an annual rate equal to the five-year treasury rate as of the most recent reset dividend determination date (as described below) plus 3.000% on the liquidation preference of $25,000 per share, quarterly in arrears, beginning on February 15, 2027.
The record date for payment of dividends on the Series Y Preferred Stock will be the record date fixed by the Board of Directors or any other duly authorized committee thereof that is not more than 30 nor less than 10 days prior to such dividend payment date (each, a “Dividend Record Date”). Any such day that is a Dividend Record Date will be a Dividend Record Date whether or not such day is a business day.
For any reset period beginning on or after the First Reset Date, the five-year treasury rate will be:
• The average of the yields on actively traded U.S. treasury securities adjusted to constant maturity, for five-year maturities, for the five business days appearing under the caption “Treasury Constant Maturities’’ in the most recently published statistical release designated H.15 Daily Update or any successor publication which is published by the Federal Reserve Board as of 5:00 p.m. (Eastern Time) as of any date of determination, as determined by the Calculation Agent in its sole discretion.
• If no calculation is provided as described above, then the Company (or such affiliate) will use a substitute or successor rate that it has determined, in its sole discretion after consulting any source it deems to be reasonable, is (i) the industry-accepted substitute or successor for the five-year treasury rate or (ii) if there is no such industry-accepted substitute or successor for the five-year treasury rate, a substitute or successor rate that is most comparable to the five-year treasury rate. Upon selection of a substitute or
successor rate, the Company (or such affiliate) may determine, in its sole discretion after consulting any source it deems to be reasonable, the day count convention, the business day convention, the definition of business day, the reset dividend determination date and any other relevant methodology or definition for calculating such substitute or successor rate, including any adjustment factor it determines is needed to make such substitute or successor rate comparable to the five-year treasury rate, in a manner that is consistent with any industry-accepted practices for such substitute or successor rate.
The five-year treasury rate will be determined on each reset dividend determination date.
With respect to any dividend period, any dividends on the Series Y Preferred Stock will be calculated on the basis of a 360-day year of twelve 30-day months, and “dividend period” means the period from, and including, each dividend payment date to, but excluding, the next succeeding dividend payment date, except for the initial dividend period, which will be the period from, and including, the date of issuance of the Series Y Preferred Stock to, but excluding, the first dividend payment date. In the event that any dividend payment date is not a business day, then payment of any dividend payable on such date will be made on the next succeeding business day and without any additional dividend accrual or other payment in respect of any such postponement.
Any determination, decision or election that may be made by the Company (or one of its affiliates) pursuant to the provisions described above, including any determination with respect to tenor, rate or adjustment or of the occurrence or non-occurrence of an event, circumstance or date and any decision to take or refrain from taking any action or any selection, will be conclusive and binding absent manifest error, will be made in the Company’s (or such affiliate’s) sole discretion, and, notwithstanding anything to the contrary in this Certificate of Designations, shall become effective without consent from the holders of the Series Y Preferred Stock or any other party.
All percentages resulting from any calculation of the dividend rate will be rounded, if necessary, to the nearest 1/100,000 of 1% (.0000001), with five one-millionths of a percentage point rounded upward. All currency amounts used in, or resulting from, the calculation on the Series Y Preferred Stock will be rounded to the nearest one-hundredth of a unit. For purposes of rounding, .005 of a unit shall be rounded upward.
(b) Noncumulative Dividends. If the Board of Directors or any duly authorized committee thereof does not declare a dividend on the Series Y Preferred Stock for any dividend period prior to the related dividend payment date, that dividend will not accrue, and the Company will have no obligation to pay, and Holders shall have no right to receive, a dividend for that dividend period on the related dividend payment date or at any future time, whether or not dividends on the Series Y Preferred Stock or any other series of preferred stock or common stock are declared for any subsequent period. References herein to the “accrual” of dividends refer only to the determination of the amount of such dividend and do not imply that any right to a dividend arises prior to the date on which a dividend is declared.
(c) Priority of Dividends. So long as any share of Series Y Preferred Stock remains outstanding, unless as to a dividend payment date full dividends on all outstanding shares of the Series Y Preferred Stock have been declared and paid or declared and a sum sufficient for the payment of those dividends has been set aside for the dividend period then ending, the Company will not, and will cause its subsidiaries not to, during the next succeeding dividend period, declare or pay any dividend on, make any distributions relating to, or redeem, purchase, acquire or make a liquidation payment relating to, any Junior Stock, or make any guarantee payment with respect thereto, other than:
(i) purchases, redemptions or other acquisitions of shares of Junior Stock in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of employees, officers, directors or consultants;
(ii) purchases of shares of Common Stock pursuant to a contractually binding requirement to buy stock existing prior to the commencement of the then-current dividend period, including under a contractually binding stock repurchase plan;
(iii) as a result of an exchange or conversion of any class or series of Junior Stock for any other class or series of Junior Stock;
(iv) the purchase of fractional interests in shares of Junior Stock pursuant to the conversion or exchange provisions of such Junior Stock or the security being converted or exchanged;
(v) the purchase of Junior Stock by an investment banking subsidiary of the Company in connection with the distribution thereof; or
(vi) the purchase of Junior Stock by any investment banking subsidiary of the Company in connection with market-making or other secondary market activities in the ordinary course of the business of such subsidiary.
The restrictions set forth in the preceding provisions of this Section 4(c) shall not apply to any Junior Stock dividends paid by the Company where the dividend is in the form of the same stock (or the right to buy the same stock) as that on which the dividend is being paid.
Except as provided below, for so long as any share of Series Y Preferred Stock remains outstanding, if dividends are not declared and paid in full upon the shares of Series Y Preferred Stock and any class or series of stock of the Company now existing or hereafter authorized that ranks equally with the Series Y Preferred Stock in the payment of dividends, all dividends declared upon shares of Series Y Preferred Stock and such other stock will be declared on a proportional basis so that the amount of dividends declared per share will bear to each other the same ratio that accrued dividends for the then-current dividend period per share of Series Y Preferred Stock and accrued dividends for the then-current dividend period per share of such other stock (including, in the case of any such other stock that bears cumulative dividends, all accrued and unpaid dividends) bear to each other.
Subject to the foregoing, and not otherwise, such dividends payable in cash, stock or otherwise, as may be determined by the Board of Directors or any duly authorized committee thereof, may be declared and paid on any other class or series of stock of the Company from time to time out of any funds legally available for such payment, and Holders will not be entitled to participate in those dividends.
Section 5. Liquidation Rights.
(a) Liquidation. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company, Holders shall be entitled, out of funds legally available therefor, before any distribution or payment may be made by the Company or set aside for the holders of any Junior Stock and subject to the rights of the holders of any class or series of stock ranking senior to or on parity with Series Y Preferred Stock upon liquidation and the rights of the Company’s depositors and other creditors, to receive in full a liquidating distribution in the amount of the liquidation preference of $25,000 per share (the “Series Y Liquidation Preference”), plus any accrued dividends thereon from the last dividend payment date to, but excluding, the date of the liquidation, dissolution or winding up if and to the extent declared but
not yet paid. Holders shall not be entitled to any further payments in the event of any such voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company other than what is expressly provided for in this Section 5.
(b) Partial Payment. If the assets of the Company are not sufficient to pay in full the aforesaid liquidation distributions to the Holders and any liquidation distributions owed to holders of any class or series of stock of the Company ranking equally with the Series Y Preferred Stock in the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the Company, the amounts paid to the Holders and to the holders of all such equally ranking stock shall be pro rata in accordance with the respective aggregate liquidating distributions to which they would otherwise be entitled.
(c) Merger, Consolidation and Sale of Assets Not Liquidation. For purposes of this Section 5, the sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the property and assets of the Company shall not be deemed a voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, nor shall the merger, consolidation or any other business combination transaction of the Company into or with any other corporation or Person or the merger, consolidation or any other business combination transaction of any other corporation or Person into or with the Company be deemed to be a voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company.
Section 6. Redemption.
(a) Optional Redemption. The Company, at the option of its Board of Directors or any duly authorized committee thereof, may redeem out of funds legally available therefor, (i) in whole at any time or in part, from time to time, the shares of Series Y Preferred Stock at the time outstanding, on any dividend payment date beginning on or after the First Reset Date, or (ii) in whole but not in part at any time within 90 days following a Regulatory Capital Event, in each case at a redemption price equal to $25,000 per share plus any declared and unpaid dividends, without accumulation of any undeclared dividends, to, but excluding, the redemption date, upon notice given as provided in Section 6(b) below.
(b) Notice of Redemption. Notice of every redemption of shares of Series Y Preferred Stock shall be mailed by first class mail, postage prepaid, addressed to the Holders of such shares to be redeemed at their respective last addresses appearing on the stock register of the Company. Such mailing shall be at least 5 days and not more than 30 days before the date fixed for redemption. Any notice mailed as provided in this Section 6(b) shall be conclusively presumed to have been duly given, whether or not the Holder receives such notice, but failure duly to give such notice by mail, or any defect in such notice or in the mailing thereof, to any Holder of shares of Series Y Preferred Stock designated for redemption shall not affect the validity of the proceedings for the redemption of any other shares of Series Y Preferred Stock. Each notice shall state:
(i) the redemption date;
(ii) the total number of shares of Series Y Preferred Stock to be redeemed and, if fewer than all the shares of a Holder are to be redeemed, the number of such shares to be redeemed;
(iii) the redemption price;
(iv) the place or places where the certificates for such shares are to be surrendered for payment of the redemption price, if applicable; and
(v) that dividends on the shares to be redeemed will cease to accrue on the redemption date.
Notwithstanding the foregoing, if the certificates evidencing the shares of Series Y Preferred Stock are held of record by a depositary and any related depository shares are held of record by a Depositary or its nominee, the Company may give such notice in any manner permitted by the Depositary.
(c) Partial Redemption. In case of any redemption of only part of the shares of Series Y Preferred Stock at the time outstanding, the shares of Series Y Preferred Stock to be redeemed shall be selected (i) pro rata from the Holders in proportion to the number of shares of Series Y Preferred Stock held by such Holders, (ii) by lot or (iii) in such other manner as the Board of Directors or any duly authorized committee thereof may determine, in its sole discretion, to be fair and equitable. Subject to the provisions of this Section 6, the Board of Directors or any duly authorized committee thereof shall have full power and authority to prescribe the terms and conditions upon which shares of Series Y Preferred Stock shall be redeemed from time to time.
(d) Effectiveness of Redemption. If notice of redemption has been duly given and if on or before the redemption date specified in the notice all funds necessary for the redemption have been set aside by the Company, separate and apart from its other assets, for the pro rata benefit of the Holders of the shares called for redemption, so as to be and continue to be available therefor, or deposited by the Company with a bank or trust company selected by the Board of Directors or any duly authorized committee thereof (the “Trust”) in trust for the pro rata benefit of the Holders of the shares called for redemption, then, notwithstanding that any certificate for any share so called for redemption has not been surrendered for cancellation, on and after the redemption date all shares so called for redemption shall cease to be outstanding, all dividends with respect to such shares shall cease to accrue on such redemption date, and all rights with respect to such shares shall forthwith on such redemption date cease and terminate, except only the right of the Holders thereof to receive the amount payable on such redemption from the Trust at any time after the redemption date from the funds so deposited, without interest. The Company shall be entitled to receive, from time to time, from the Trust any interest accrued on such funds, and the Holders of any shares called for redemption shall have no claim to any such interest. Any funds so deposited and unclaimed at the end of three years from the redemption date shall, to the extent permitted by law, be released or repaid to the Company, and in the event of such repayment to the Company, the Holders of the shares so called for redemption shall be deemed to be unsecured creditors of the Company for an amount equivalent to the amount deposited as stated above for the redemption of such shares and so repaid to the Company, but shall in no event be entitled to any interest.
Section 7. Voting Rights.
(a) General. The Holders shall not be entitled to vote on any matter except as set forth in Section 7(b) below or as required by the Delaware General Corporation Law.
(b) Special Voting Right.
(i) Voting Right. If and whenever dividends on the Series Y Preferred Stock or any other class or series of preferred stock that ranks on parity with the Series Y Preferred Stock as to payment of dividends and upon which voting rights equivalent to those granted by this Section 7(b)(i) have been conferred and are exercisable (any such class or series being referred to herein as “dividend parity stock”) have not been declared and paid in an aggregate amount equal, as to any class or series, to at least three semi-annual or six quarterly dividend periods, as applicable, (whether consecutive or not) (a “Nonpayment”), the authorized number of directors constituting the Board of Directors shall be increased by two, and the Holders, together with holders of dividend parity stock, shall have the right, voting separately as a single class without regard to class or series (and with voting rights allocated pro rata based on the liquidation preference of each such class or series), to the exclusion of the holders of Common Stock, to elect two directors of the Company to fill such newly created directorships (and to fill any vacancies in the terms of such directorships), provided that it shall be a qualification for election of any such director that the election of such director shall not cause the Company to violate the corporate governance requirements of the New York Stock Exchange (or other exchange on which the Company’s securities may be listed) that listed companies must have a majority of independent directors and further provided that the Board of Directors shall at no time include more than two such directors. Each such director elected by the Holders together with holders of dividend parity stock is a “Preferred Stock Director.”
(ii) Election. The election of the Preferred Stock Directors will take place at any annual meeting of stockholders or any special meeting of the Holders and any dividend parity stock, called as provided herein. At any time after the special voting power has vested pursuant to Section 7(b)(i) above, the secretary of the Company may, and upon the written request (addressed to the secretary at the Company’s principal office) of the holders of at least 20% of the voting power of the Series Y Preferred Stock or the holders of at least 20% of the voting power of any series of dividend parity stock then outstanding (with such voting power measured based on the voting power to elect Preferred Stock Directors), must (unless such request is received less than 90 days before the date fixed for the next annual or special meeting of the stockholders of the Company, in which event such election shall be held at such next annual or special meeting of stockholders), call a special meeting of the holders of Series Y Preferred Stock and any dividend parity stock for the purposes of electing Preferred Stock Directors. The Preferred Stock Directors shall each be entitled to one vote per director on any matter.
(iii) Notice of Special Meeting. Notice for a special meeting to elect Preferred Stock Directors will be given in a similar manner to that provided in the Company’s by-laws for a special meeting of the stockholders. If the secretary of the Company does not call a special meeting within 20 days after receipt of any such request, then any Holder may (at the expense of the Company) call such meeting, upon notice as provided in this Section 7(b)(iii), and for that purpose will have access to the stock register of the Company. The Preferred Stock Directors
elected at any such special meeting and each Preferred Stock Director elected at a subsequent annual or special meeting of stockholders, will be elected for term expiring upon the earlier of the Preferred Stock Director Termination Date and the next annual meeting of stockholders following such Preferred Stock Director's election. In case any vacancy in the office of a Preferred Stock Director occurs (other than prior to the initial election of the Preferred Stock Directors), the vacancy may be filled by the Preferred Stock Director remaining in office, or if none remains in office, by a plurality of the votes cast by the holders of Series Y Preferred Stock and any dividend parity stock, voting together as a single class, and the Preferred Stock Director so appointed or elected to fill such vacancy shall serve for a term expiring at the next annual meeting of the stockholders. Preferred Stock Directors may only be elected by the holders of Series Y Preferred Stock and dividend parity stock in accordance with this Section 7. If the holders of Series Y Preferred Stock and such dividend parity stock fail to elect a sufficient number of directors to fill all directorships for which they are entitled to elect directors pursuant to this Section 7, then any directorship not so filled shall remain vacant until such time as the holders of Series Y Preferred Stock and such dividend parity stock elect a person to fill such directorship in accordance with this Section 7, or such vacancy is otherwise filled in accordance with this Section 7; and no such directorship may be filled by stockholders of the Company other than in accordance with this Section 7.
(iv) Termination; Removal. Whenever the Company has paid noncumulative dividends in full for at least two consecutive semi-annual or four consecutive quarterly dividend periods following a Nonpayment on the Series Y Preferred Stock and on any dividend parity stock entitled to noncumulative dividends and has paid cumulative dividends in full on any dividend parity stock entitled to cumulative dividends, then the right of the Holders to elect the Preferred Stock Directors will cease (but subject always to the same provisions for the vesting of the special voting rights in the case of any similar non-payment of dividends in respect of future dividend periods) (the time of such cessation, the “Preferred Stock Director Termination Date”). Upon a Preferred Stock Director Termination Date, the terms of office of the Preferred Stock Directors will immediately terminate, the persons then serving as Preferred Stock Directors shall immediately cease to be qualified to hold office as Preferred Stock Directors, the Preferred Stock Directors shall cease to be directors of the Company and the number of directors constituting the Board of Directors shall be automatically reduced, without any action by the Board of Directors or the stockholders of the Company, by the number of Preferred Stock Directors authorized immediately prior to such termination. Any Preferred Stock Director may be removed at any time without cause by the holders of a majority of the voting power of outstanding shares of the capital stock then entitled to vote in the election of Preferred Stock Directors, voting together as a single class (with such voting power measured based on the voting power to elect Preferred Stock Directors).
(c) Senior Issuances; Adverse Changes. So long as any shares of Series Y Preferred Stock are outstanding, but subject to the final paragraph of this Section 7(c), in addition to any other vote or consent of holders of the Company’s capital stock required by Delaware law, the vote or consent of the holders of at least two-thirds of the voting power of the Series Y Preferred Stock and the holders of any other preferred stock entitled to vote thereon, voting together as a single class, given in person or by proxy at an annual or special meeting of stockholders, or given in writing without a meeting, will be necessary for effecting or validating any of the following actions, whether or not such approval is required by Delaware law:
(i) any amendment, alteration or repeal of any provision of the Company’s certificate of incorporation (including the certificate of designations creating the Series Y Preferred Stock) or the Company’s by-laws that would alter or change the voting powers, preferences, economic rights or special rights of the Series Y Preferred Stock so as to affect them adversely;
(ii) any amendment or alteration of the Company’s certificate of incorporation to authorize or create, or increase the authorized amount of, any shares of, or any securities convertible into shares of, any class or series of the Company's capital stock ranking prior to the Series Y Preferred Stock in the payment of dividends or in the distribution of assets on any liquidation, dissolution, or winding up of the Company; or
(iii) the consummation of a binding share exchange or reclassification involving the Series Y Preferred Stock or a merger or consolidation of the Company with another entity, except that holders of Series Y Preferred Stock will have no right to vote under this provision or otherwise under Delaware law if in each case (i) the Series Y Preferred Stock remains outstanding or, in the case of any such merger or consolidation with respect to which the Company is not the surviving or resulting entity, is converted into or exchanged for preferred securities of the surviving or resulting entity or its ultimate parent, that is an entity organized and existing under the laws of the United States of America, any state thereof or the District of Columbia and that is a corporation for U.S. federal income tax purposes (or if such entity is not a corporation, the Company having received an opinion of nationally recognized counsel experienced in such matters to the effect that Holders will be subject to tax for U.S. federal income tax purposes with respect to such new preferred securities after such merger or consolidation in the same amount, at the same time and otherwise in the same manner as would have been the case under the Series Y Preferred Stock prior to such merger or consolidation), and (ii) such Series Y Preferred Stock remaining outstanding or such preferred securities, as the case may be, have such rights, preferences, privileges and voting powers, taken as a whole, as are not materially less favorable to the holders thereof than the rights, preferences, privileges and voting powers of the Series Y Preferred Stock, taken as a whole;
provided, however, that, for the avoidance of doubt, any increase in the amount of the authorized or issued Series Y Preferred Stock or authorized preferred stock or any securities convertible into preferred stock or the creation and issuance, or an increase in the authorized or issued amount, of other series of preferred stock or any securities convertible into preferred stock ranking equally with and/or junior to the Series Y Preferred Stock with respect to the payment of dividends (whether such dividends are cumulative or noncumulative) and/or the distribution of assets upon the Company’s liquidation, dissolution or winding up will not be deemed to adversely affect the voting powers, preferences or special rights of the Series Y Preferred Stock, and no stockholder will have the right to vote on such an increase, creation or issuance by reason of this Section 7.
If any amendment, alteration, repeal, share exchange, reclassification, merger or consolidation specified in this Section 7(c) would adversely affect one or more but not all series of preferred stock of the Company, then only such series of preferred stock as are adversely affected by and entitled to vote on the matter shall vote on the matter together with the Series Y Preferred Stock as a single class (in lieu of all other series of preferred stock) for purposes of the vote or consent required by this Section 7(c).
(d) No Vote if Redemption. No vote or consent of the Holders shall be required pursuant to Section 7(b) or 7(c) if, at or prior to the time when the act with respect to such vote
or consent would otherwise be required shall be effected, the Company shall have redeemed or shall have called for redemption all outstanding shares of Series Y Preferred Stock, with proper notice and sufficient funds having been set aside for such redemption, in each case pursuant to Section 6 above.
Section 8. Preemption and Conversion Rights.
The Holders shall not have any preemptive rights or conversion rights as a result of the terms hereof.
Section 9. Rank.
For the avoidance of doubt, the Board of Directors or any duly authorized committee thereof may, without the vote of the Holders, authorize and issue additional shares of Junior Stock or shares of any class or series of stock of the Company now existing or hereafter authorized that ranks equally with the Series Y Preferred Stock in the payment of dividends or in the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the Company.
Section 10. Reacquired Shares.
The Board of Directors shall take such actions as are necessary to cause the shares of Series Y Preferred Stock which have been redeemed or otherwise purchased or acquired by the Company to be retired and restored to the status of authorized but unissued shares of preferred stock without designation as to series.
Section 11. No Sinking Fund.
Shares of Series Y Preferred Stock are not subject to the operation of a sinking fund.
Section 12. Transfer Agent, Calculation Agent, Registrar and Paying Agent.
The duly appointed Transfer Agent, Calculation Agent, Registrar and paying agent for the Series Y Preferred Stock shall be Computershare Trust Company, N.A. The Company may, in its sole discretion, remove the Transfer Agent and/or the Calculation Agent in accordance with the agreements between the Company and the Transfer Agent; provided, however, that the Company shall appoint a successor transfer agent and/or calculation agent who shall accept such appointment prior to the effectiveness of such removal. Upon any such removal or appointment, the Company shall send notice thereof by first-class mail, postage prepaid, to the Holders.
Section 13. Replacement Certificates for Mutilated, Destroyed, Stolen and Lost Certificates.
If physical certificates are issued, the Company shall replace any mutilated certificate at the Holder’s expense upon surrender of that certificate to the Transfer Agent. The Company shall replace certificates that become destroyed, stolen or lost at the Holder’s expense upon delivery to the Company and the Transfer Agent of satisfactory evidence that the certificate has been destroyed, stolen or lost, together with any indemnity that may be required by the Transfer Agent and the Company.
Section 14. Form.
(a) Series Y Preferred Stock Certificates. Series Y Preferred Stock shall be issued in certificated form in substantially the form attached hereto as Exhibit A (each, a “Series Y Preferred Stock Certificate”). Exhibit A is hereby incorporated in and expressly made a part of this Certificate of Designations. The Series Y Preferred Stock Certificates may have notations, legends or endorsements required by law, stock exchange rules, agreements to which the Company is subject, if any, or usage (provided that any such notation, legend or endorsement is in a form acceptable to the Company).
(b) Signature. Two Officers shall sign any Series Y Preferred Stock Certificate for the Company, in accordance with the Company’s by-laws and applicable law, by manual or facsimile signature. If an Officer whose signature is on a Series Y Preferred Stock Certificate no longer holds that office at the time the Transfer Agent countersigned the Series Y Preferred Stock Certificate, such Series Y Preferred Stock Certificate shall be valid nevertheless. A Series Y Preferred Stock Certificate shall not be valid until an authorized signatory of the Transfer Agent manually countersigns such Series Y Preferred Stock Certificate. Each Series Y Preferred Stock Certificate shall be dated the date of its countersignature.
Section 15. Taxes.
(a) Transfer Taxes. The Company shall pay any and all stock transfer, documentary, stamp and similar taxes that may be payable in respect of any issuance or delivery of shares of Series Y Preferred Stock. The Company shall not, however, be required to pay any such tax that may be payable in respect of any transfer involved in the issuance or delivery of shares of Series Y Preferred Stock, in a name other than that in which the shares of Series Y Preferred Stock were registered, or in respect of any payment to any Person other than a payment to the registered holder thereof, and shall not be required to make any such issuance, delivery or payment unless and until the Person otherwise entitled to such issuance, delivery or payment has paid to the Company the amount of any such tax or has established, to the satisfaction of the Company, that such tax has been paid or is not payable.
(b) Withholding. All payments and distributions (or deemed distributions) on the shares of Series Y Preferred Stock shall be subject to withholding and backup withholding of tax to the extent required by law, subject to applicable exemptions, and amounts withheld, if any, shall be treated as received by Holders.
Section 16. Notices.
All notices referred to herein shall be in writing, and, unless otherwise specified herein, all notices hereunder shall be deemed to have been given upon the earlier of receipt thereof or three business days after the mailing thereof if sent by registered or certified mail (unless first class mail shall be specifically permitted for such notice under the terms of this Certificate of Designations) with postage prepaid, addressed: (i) if to the Company, to its office at 388 Greenwich Street, New York, New York 10013 (Attention: Corporate Secretary) or to the Transfer Agent at its office at 150 Royall Street, Canton, Massachusetts 02021, or other agent of the Company designated as permitted by this Certificate of Designations, or (ii) if to any Holder, to such Holder at the address of such Holder as listed in the stock record books of the Company (which may include the records of the Transfer Agent) or (iii) to such other address as the Company or any such Holder, as the case may be, shall have designated by notice similarly given.
Section 17. Other Rights Disclaimed.
The shares of Series Y Preferred Stock have no voting powers, preferences or relative, participating, optional or other special rights, or qualifications, limitations or restrictions thereof, other than as set forth herein or in the Certificate of Incorporation of the Company.
IN WITNESS WHEREOF, this Certificate of Designations has been executed on behalf of the Company by its Treasurer this 26th day of October, 2021.
CITIGROUP INC.
By: __/s/ Michael Verdeschi_______________________
Name: Michael Verdeschi
Title: Treasurer
Exhibit A
FORM OF 4.150% FIXED RATE RESET NONCUMULATIVE PREFERRED STOCK, SERIES Y
Certificate Number_______ Number of Shares of Series Y Preferred Stock______
CUSIP NO.:
CITIGROUP INC.
4.150% Fixed Rate Reset Noncumulative Preferred Stock, Series Y
(par value $1.00 per share) (liquidation preference $25,000 per share)
Citigroup Inc., a Delaware corporation (the “Company”), hereby certifies that [ ] (the “Holder”) is the registered owner of [ ] fully paid and non-assessable shares of the Company’s designated 4.150% Fixed Rate Reset Noncumulative Preferred Stock, Series Y, with a par value of $1.00 per share and a liquidation preference of $25,000 per share (the “Series Y Preferred Stock”). The shares of Series Y Preferred Stock are transferable on the books and records of the Registrar, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer. The designations, rights, privileges, restrictions, preferences and other terms and provisions of the Series Y Preferred Stock represented hereby are and shall in all respects be subject to the provisions of the Certificate of Designations dated October 26, 2021 as the same may be amended from time to time (the “Certificate of Designations”). Capitalized terms used herein but not defined shall have the meaning given them in the Certificate of Designations. The Company will provide a copy of the Certificate of Designations to a Holder without charge upon written request to the Company at its principal place of business.
Reference is hereby made to select provisions of the Series Y Preferred Stock set forth on the reverse hereof, and to the Certificate of Designations, which select provisions and the Certificate of Designations shall for all purposes have the same effect as if set forth at this place.
Upon receipt of this certificate, the Holder is bound by the Certificate of Designations and is entitled to the benefits thereunder.
Unless the Registrar has properly countersigned, these shares of Series Y Preferred Stock shall not be entitled to any benefit under the Certificate of Designations or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, this certificate has been executed on behalf of the Company by its [Title] and by its [Title] this __ day of _______, ________.
CITIGROUP INC.
By: _______________________________________ Name: Title:
By: _______________________________________ Name: Title:
REGISTRAR’S COUNTERSIGNATURE
These are shares of Series Y Preferred Stock referred to in the within-mentioned Certificate of Designations.
Dated:
COMPUTERSHARE TRUST COMPANY, N.A., as Registrar
By: _______________________________________ Name: Title:
REVERSE OF CERTIFICATE
Dividends on each share of Series Y Preferred Stock shall be payable at the rate provided in the Certificate of Designations.
The shares of Series Y Preferred Stock shall be redeemable at the option of the Company in the manner and in accordance with the terms set forth in the Certificate of Designations.
The Company shall furnish without charge to each holder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class or Series of share capital issued by the Company and the qualifications, limitations or restrictions of such preferences and/or rights.
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers the shares of Series Y Preferred Stock evidenced hereby to:
___________________________________________________
___________________________________________________
(Insert assignee’s social security or taxpayer identification number, if any)
___________________________________________________
___________________________________________________
(Insert address and zip code of assignee)
and irrevocably appoints:
___________________________________________________
___________________________________________________
as agent to transfer the shares of Series Y Preferred Stock evidenced hereby on the books of the Transfer Agent. The agent may substitute another to act for him or her.
Date:
Signature:
___________________________________________________
(Sign exactly as your name appears on the other side of this Certificate)
Signature Guarantee: ___________________________________________________
(Signature must be guaranteed by an “eligible guarantor institution” that is a bank, stockbroker, savings and loan association or credit union meeting the requirements of the Transfer Agent, which requirements include membership or participation in the Securities Transfer Agents Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Transfer Agent in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.)
CERTIFICATE OF DESIGNATIONS
OF
7.375% FIXED RATE RESET NONCUMULATIVE PREFERRED STOCK SERIES Z
OF
CITIGROUP INC.
______________________________
pursuant to Section 151 of the
General Corporation Law of the State of Delaware
______________________________
Citigroup Inc., a Delaware corporation (the “Company”), hereby certifies that:
-
The Restated Certificate of Incorporation of the Company \(as amended through the date hereof, the “Certificate of Incorporation”\) fixes the total number of shares of all classes of capital stock that the Company shall have the authority to issue at six billion \(6,000,000,000\) shares of common stock, par value $0.01 per share, and thirty million \(30,000,000\) shares of preferred stock, par value $1.00 per share. -
The Certificate of Incorporation expressly grants to the Board of Directors of the Company \(the “Board of Directors”\) authority to provide for the issuance of the shares of preferred stock in series, and to establish from time to time the number of shares to be included in each such series and to fix the designation, powers, preferences and rights of the shares of each such series and the qualifications, limitations or restrictions thereof. -
Pursuant to the authority conferred upon a preferred stock committee \(the “Preferred Stock Committee”\) by the Board of Directors, the Preferred Stock Committee, by action duly taken on February 28, 2023, adopted resolutions \(i\) authorizing the issuance and sale of up to 50,000 shares of the Company’s preferred stock and \(ii\) approving this final form of Certificate of Designations of 7.375% Fixed Rate Reset Noncumulative Preferred Stock, Series Z \(the “Series Z Preferred Stock”\), establishing the number of shares to be included in this Series Z Preferred Stock and fixing the designation, powers, preferences and rights of the shares of this Series Z Preferred Stock and the qualifications, limitations or restrictions thereof as follows:
Section 1. Designation.
The designation of the series of preferred stock shall be “7.375% Fixed Rate Reset Noncumulative Preferred Stock, Series Z”. Each share of Series Z Preferred Stock shall be identical in all respects to every other share of Series Z Preferred Stock.
Section 2. Number of Shares.
The number of authorized shares of Series Z Preferred Stock shall be 50,000. That number from time to time may be increased (but not in excess of the total number of authorized shares of preferred stock) or decreased (but not below the number of shares of Series Z Preferred Stock then outstanding) by further resolution duly adopted by the Board of Directors, the Preferred Stock Committee or any other duly authorized committee thereof and by the filing of a certificate pursuant to the provisions of the General Corporation Law of the State of Delaware stating that such increase or reduction, as the case may be, has been so authorized. The Company shall have the authority to issue fractional shares of Series Z Preferred Stock.
Section 3. Definitions. As used herein with respect to Series Z Preferred Stock:
“Appropriate Federal Banking Agency” means the “appropriate Federal banking agency” with respect to the Company as that term is defined in Section 3(q) of the Federal Deposit Insurance Act of 1950, as amended, or any successor provision.
“Board of Directors” has the meaning set forth in the recitals above.
“business day” means any weekday that is not a legal holiday in New York City and is not a day on which banking institutions in New York City are authorized or required by law or regulation to be closed.
“Calculation Agent” means the Transfer Agent acting in its capacity as calculation agent
for the Series Z Preferred Stock, and its successors and assigns.
“Common Stock” means the common stock of the Company, par value $0.01 per share, or any other shares of the capital stock of the Company into which such shares of common stock shall be reclassified or changed.
“Depositary” means DTC or its nominee or any successor depositary appointed by the Company.
“dividend payment date” shall have the meaning set forth in Section 4(a) hereof.
“dividend period” shall have the meaning set forth in Section 4(a) hereof.
“Dividend Record Date” shall have the meaning set forth in Section 4(a) hereof.
“DTC” means The Depository Trust Company.
“First Reset Date” shall have the meaning set forth in Section 4(a) hereof.
“Holder” means the Person in whose name the shares of the Series Z Preferred Stock are registered, which may be treated by the Company, Calculation Agent, Transfer Agent, Registrar and paying agent as the absolute owner of the shares of Series Z Preferred Stock for the purpose of making payment and for all other purposes.
“Junior Stock” means the Common Stock and any other class or series of stock of the
Company now existing or hereafter authorized over which Series Z Preferred Stock has
preference or priority in the payment of dividends or in the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the Company.
“Nonpayment” shall have the meaning set forth in Section 7(b)(i) hereof.
“NY Federal Reserve’s website” shall have the meaning set forth in Section 4(a) hereof.
“Officer” means the Chief Executive Officer, the Chairman, the Chief Administrative Officer, any Vice Chairman, the Chief Financial Officer, the Controller, the Chief Accounting
Officer, the Treasurer, any Deputy Treasurer, any Assistant Treasurer, any Vice President, the General Counsel and Corporate Secretary and any Assistant Secretary of the Company.
“Person” means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint-stock company, limited liability company, trust, or other entity.
“Preferred Stock Director” shall have the meaning set forth in Section 7(b)(i) hereof.
“Preferred Stock Director Termination Date” shall have the meaning set forth in Section 7(b)(iv) hereof.
“Registrar” means the Transfer Agent acting in its capacity as registrar for the Series Z Preferred Stock, and its successors and assigns.
“Regulatory Capital Event” means the good faith determination by the Company that, as a result of (i) any amendment to, clarification of, or change in, the laws or regulations of the United States (including, for the avoidance of doubt, any agency or instrumentality of the United States, including the Federal Reserve and other federal bank regulatory agencies) or any political subdivision of or in the United States that is enacted or becomes effective after the initial issuance of any share of the Series Z Preferred Stock, (ii) any proposed change in those laws or regulations that is announced or becomes effective after the initial issuance of any share of the Series Z Preferred Stock, or (iii) any official administrative decision or judicial decision or administrative action or other official pronouncement interpreting or applying those laws or regulations or policies with respect thereto that is announced after the initial issuance of any share of the Series Z Preferred Stock, there is more than an insubstantial risk that the Company will not be entitled to treat the full liquidation preference amount of $25,000 per share of the Series Z Preferred Stock then outstanding as “tier 1 capital” (or its equivalent) for purposes of the capital adequacy guidelines of the Federal Reserve (or, as and if applicable, the capital adequacy guidelines or regulations of any successor Appropriate Federal Banking Agency) as then in effect and applicable, for so long as any share of the Series Z Preferred Stock is outstanding.
“Relevant Governmental Body” shall have the meaning set forth in Section 4(a) hereof.
“reset date” means the First Reset Date and each date falling on the fifth anniversary of the preceding reset date, and no reset date, including the First Reset Date, will be adjusted for business days.
“reset dividend determination date” means, in respect of any reset period, the day that is three business days prior to the beginning of such reset period.
“reset period” means the period from, and including, each reset date to, but excluding, the next succeeding reset date, except for the initial reset period, which will be the period from, and including, the First Reset Date to, but excluding, the next succeeding reset date.
“Series Z Liquidation Preference” shall have the meaning set forth in Section 5(a) hereof.
“Series Z Preferred Stock” shall have the meaning set forth in Section 1 hereof.
“Series Z Preferred Stock Certificate” shall have the meaning set forth in Section 14(a) hereof.
“Transfer Agent” means Computershare Trust Company, N.A., a federally chartered national association, acting as Transfer Agent, Calculation Agent, Registrar and paying agent for the Series Z Preferred Stock, and its successors and assigns.
“Trust” shall have the meaning set forth in Section 6(d).
Section 4. Dividends.
a.Rate. Holders shall be entitled to receive, when, as and if declared by the Board of Directors or any duly authorized committee thereof, but only out of funds legally available therefor, noncumulative cash dividends on each share of Series Z Preferred Stock in the amounts specified below in this Section 4, and no more, payable on the 15th of each February, May, August and November (each, a “dividend payment date”), (i) quarterly in arrears from, and including, the date of issuance to, but excluding, May 15, 2028 (the “First Reset Date”), at an annual rate of 7.375% on the liquidation preference of $25,000 per share, beginning on August 15, 2023, and (ii) from, and including the First Reset Date, for each reset period, at an annual rate equal to the five-year treasury rate as of the most recent reset dividend determination date (as described below) plus 3.209% on the liquidation preference of $25,000 per share, quarterly in arrears, beginning on August 15, 2028.
The record date for payment of dividends on the Series Z Preferred Stock will be the record date fixed by the Board of Directors or any other duly authorized committee thereof that is not more than 30 nor less than 10 days prior to such dividend payment date (each, a “Dividend Record Date”). Any such day that is a Dividend Record Date will be a Dividend Record Date whether or not such day is a business day.
For any reset period beginning on or after the First Reset Date, the five-year treasury rate will be:
• The average of the yields on actively traded U.S. treasury securities adjusted to constant maturity, for five-year maturities, for the five business days appearing under the caption “Treasury Constant Maturities’’ in the most recently published statistical release designated H.15 Daily Update or any successor publication which is published by the Federal Reserve Board as of 5:00 p.m. (Eastern Time) as of any date of determination, as determined by the Calculation Agent in its sole discretion.
• If no calculation is provided as described above, then the Company (or such affiliate) will use a substitute or successor rate that it has determined, in its sole discretion after consulting any source it deems to be reasonable, is (i) the industry-accepted substitute or successor for the five-year treasury rate or (ii) if there is no such industry-accepted substitute or successor for the five-year treasury rate, a substitute or successor rate that is most comparable to the five-year treasury rate. Upon selection of a substitute or
successor rate, the Company (or such affiliate) may determine, in its sole discretion after consulting any source it deems to be reasonable, the day count convention, the business day convention, the definition of business day, the reset dividend determination date and any other relevant methodology or definition for calculating such substitute or successor rate, including any adjustment factor it determines is needed to make such substitute or successor rate comparable to the five-year treasury rate, in a manner that is consistent with any industry-accepted practices for such substitute or successor rate.
The five-year treasury rate will be determined on each reset dividend determination date.
With respect to any dividend period, any dividends on the Series Z Preferred Stock will be calculated on the basis of a 360-day year of twelve 30-day months, and “dividend period” means the period from, and including, each dividend payment date to, but excluding, the next succeeding dividend payment date, except for the initial dividend period, which will be the period from, and including, the date of issuance of the Series Z Preferred Stock to, but excluding, the first dividend payment date. In the event that any dividend payment date is not a business day, then payment of any dividend payable on such date will be made on the next succeeding business day and without any additional dividend accrual or other payment in respect of any such postponement.
Any determination, decision or election that may be made by the Company (or one of its affiliates) pursuant to the provisions described above, including any determination with respect to tenor, rate or adjustment or of the occurrence or non-occurrence of an event, circumstance or date and any decision to take or refrain from taking any action or any selection, will be conclusive and binding absent manifest error, will be made in the Company’s (or such affiliate’s) sole discretion, and, notwithstanding anything to the contrary in this Certificate of Designations, shall become effective without consent from the holders of the Series Z Preferred Stock or any other party.
All percentages resulting from any calculation of the dividend rate will be rounded, if necessary, to the nearest 1/100,000 of 1% (.0000001), with five one-millionths of a percentage point rounded upward. All currency amounts used in, or resulting from, the calculation on the Series Z Preferred Stock will be rounded to the nearest one-hundredth of a unit. For purposes of rounding, .005 of a unit shall be rounded upward.
(b) Noncumulative Dividends. If the Board of Directors or any duly authorized committee thereof does not declare a dividend on the Series Z Preferred Stock for any dividend period prior to the related dividend payment date, that dividend will not accrue, and the Company will have no obligation to pay, and Holders shall have no right to receive, a dividend for that dividend period on the related dividend payment date or at any future time, whether or not dividends on the Series Z Preferred Stock or any other series of preferred stock or common stock are declared for any subsequent period. References herein to the “accrual” of dividends refer only to the determination of the amount of such dividend and do not imply that any right to a dividend arises prior to the date on which a dividend is declared.
(c) Priority of Dividends. So long as any share of Series Z Preferred Stock remains outstanding, unless as to a dividend payment date full dividends on all outstanding shares of the Series Z Preferred Stock have been declared and paid or declared and a sum sufficient for the payment of those dividends has been set aside for the dividend period then ending, the Company will not, and will cause its subsidiaries not to, during the next succeeding dividend period, declare or pay any dividend on, make any distributions relating to, or redeem, purchase, acquire or make a liquidation payment relating to, any Junior Stock, or make any guarantee payment with respect thereto, other than:
(i) purchases, redemptions or other acquisitions of shares of Junior Stock in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of employees, officers, directors or consultants;
(ii) purchases of shares of Common Stock pursuant to a contractually binding requirement to buy stock existing prior to the commencement of the then-current dividend period, including under a contractually binding stock repurchase plan;
(iii) as a result of an exchange or conversion of any class or series of Junior Stock for any other class or series of Junior Stock;
(iv) the purchase of fractional interests in shares of Junior Stock pursuant to the conversion or exchange provisions of such Junior Stock or the security being converted or exchanged;
(v) the purchase of Junior Stock by an investment banking subsidiary of the Company in connection with the distribution thereof; or
(vi) the purchase of Junior Stock by any investment banking subsidiary of the Company in connection with market-making or other secondary market activities in the ordinary course of the business of such subsidiary.
The restrictions set forth in the preceding provisions of this Section 4(c) shall not apply to any Junior Stock dividends paid by the Company where the dividend is in the form of the same stock (or the right to buy the same stock) as that on which the dividend is being paid.
Except as provided below, for so long as any share of Series Z Preferred Stock remains outstanding, if dividends are not declared and paid in full upon the shares of Series Z Preferred Stock and any class or series of stock of the Company now existing or hereafter authorized that ranks equally with the Series Z Preferred Stock in the payment of dividends, all dividends declared upon shares of Series Z Preferred Stock and such other stock will be declared on a proportional basis so that the amount of dividends declared per share will bear to each other the same ratio that accrued dividends for the then-current dividend period per share of Series Z Preferred Stock and accrued dividends for the then-current dividend period per share of such other stock (including, in the case of any such other stock that bears cumulative dividends, all accrued and unpaid dividends) bear to each other.
Subject to the foregoing, and not otherwise, such dividends payable in cash, stock or otherwise, as may be determined by the Board of Directors or any duly authorized committee thereof, may be declared and paid on any other class or series of stock of the Company from time to time out of any funds legally available for such payment, and Holders will not be entitled to participate in those dividends.
Section 5. Liquidation Rights.
(a) Liquidation. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company, Holders shall be entitled, out of funds legally available therefor, before any distribution or payment may be made by the Company or set aside for the holders of any Junior Stock and subject to the rights of the holders of any class or series of stock ranking senior to or on parity with Series Z Preferred Stock upon liquidation and the rights of the Company’s depositors and other creditors, to receive in full a liquidating distribution in the amount of the liquidation preference of $25,000 per share (the “Series Z Liquidation Preference”), plus any accrued dividends thereon from the last dividend payment date to, but excluding, the date of the liquidation, dissolution or winding up if and to the extent declared but
not yet paid. Holders shall not be entitled to any further payments in the event of any such voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company other than what is expressly provided for in this Section 5.
(b) Partial Payment. If the assets of the Company are not sufficient to pay in full the aforesaid liquidation distributions to the Holders and any liquidation distributions owed to holders of any class or series of stock of the Company ranking equally with the Series Z Preferred Stock in the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the Company, the amounts paid to the Holders and to the holders of all such equally ranking stock shall be pro rata in accordance with the respective aggregate liquidating distributions to which they would otherwise be entitled.
(c) Merger, Consolidation and Sale of Assets Not Liquidation. For purposes of this Section 5, the sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the property and assets of the Company shall not be deemed a voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, nor shall the merger, consolidation or any other business combination transaction of the Company into or with any other corporation or Person or the merger, consolidation or any other business combination transaction of any other corporation or Person into or with the Company be deemed to be a voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company.
Section 6. Redemption.
(a) Optional Redemption. The Company, at the option of its Board of Directors or any duly authorized committee thereof, may redeem out of funds legally available therefor, (i) in whole at any time or in part, from time to time, the shares of Series Z Preferred Stock at the time outstanding, on any dividend payment date beginning on or after the First Reset Date, or (ii) in whole but not in part at any time within 90 days following a Regulatory Capital Event, in each case at a redemption price equal to $25,000 per share plus any declared and unpaid dividends, without accumulation of any undeclared dividends, to, but excluding, the redemption date, upon notice given as provided in Section 6(b) below.
(b) Notice of Redemption. Notice of every redemption of shares of Series Z Preferred Stock shall be mailed by first class mail, postage prepaid, addressed to the Holders of such shares to be redeemed at their respective last addresses appearing on the stock register of the Company. Such mailing shall be at least 5 days and not more than 30 days before the date fixed for redemption. Any notice mailed as provided in this Section 6(b) shall be conclusively presumed to have been duly given, whether or not the Holder receives such notice, but failure duly to give such notice by mail, or any defect in such notice or in the mailing thereof, to any Holder of shares of Series Z Preferred Stock designated for redemption shall not affect the validity of the proceedings for the redemption of any other shares of Series Z Preferred Stock. Each notice shall state:
(i) the redemption date;
(ii) the total number of shares of Series Z Preferred Stock to be redeemed and, if fewer than all the shares of a Holder are to be redeemed, the number of such shares to be redeemed;
(iii) the redemption price;
(iv) the place or places where the certificates for such shares are to be surrendered for payment of the redemption price, if applicable; and
(v) that dividends on the shares to be redeemed will cease to accrue on the redemption date.
Notwithstanding the foregoing, if the certificates evidencing the shares of Series Z Preferred Stock are held of record by a depositary and any related depository shares are held of record by a Depositary or its nominee, the Company may give such notice in any manner permitted by the Depositary.
(c) Partial Redemption. In case of any redemption of only part of the shares of Series Z Preferred Stock at the time outstanding, the shares of Series Z Preferred Stock to be redeemed shall be selected (i) pro rata from the Holders in proportion to the number of shares of Series Z Preferred Stock held by such Holders, (ii) by lot or (iii) in such other manner as the Board of Directors or any duly authorized committee thereof may determine, in its sole discretion, to be fair and equitable. Subject to the provisions of this Section 6, the Board of Directors or any duly authorized committee thereof shall have full power and authority to prescribe the terms and conditions upon which shares of Series Z Preferred Stock shall be redeemed from time to time.
(d) Effectiveness of Redemption. If notice of redemption has been duly given and if on or before the redemption date specified in the notice all funds necessary for the redemption have been set aside by the Company, separate and apart from its other assets, for the pro rata benefit of the Holders of the shares called for redemption, so as to be and continue to be available therefor, or deposited by the Company with a bank or trust company selected by the Board of Directors or any duly authorized committee thereof (the “Trust”) in trust for the pro rata benefit of the Holders of the shares called for redemption, then, notwithstanding that any certificate for any share so called for redemption has not been surrendered for cancellation, on and after the redemption date all shares so called for redemption shall cease to be outstanding, all dividends with respect to such shares shall cease to accrue on such redemption date, and all rights with respect to such shares shall forthwith on such redemption date cease and terminate, except only the right of the Holders thereof to receive the amount payable on such redemption from the Trust at any time after the redemption date from the funds so deposited, without interest. The Company shall be entitled to receive, from time to time, from the Trust any interest accrued on such funds, and the Holders of any shares called for redemption shall have no claim to any such interest. Any funds so deposited and unclaimed at the end of three years from the redemption date shall, to the extent permitted by law, be released or repaid to the Company, and in the event of such repayment to the Company, the Holders of the shares so called for redemption shall be deemed to be unsecured creditors of the Company for an amount equivalent to the amount deposited as stated above for the redemption of such shares and so repaid to the Company, but shall in no event be entitled to any interest.
Section 7. Voting Rights.
(a) General. The Holders shall not be entitled to vote on any matter except as set forth in Section 7(b) below or as required by the Delaware General Corporation Law.
(b) Special Voting Right.
(i) Voting Right. If and whenever dividends on the Series Z Preferred Stock or any other class or series of preferred stock that ranks on parity with the Series Z Preferred Stock as to payment of dividends and upon which voting rights equivalent to those granted by this Section 7(b)(i) have been conferred and are exercisable (any such class or series being referred to herein as “dividend parity stock”) have not been declared and paid in an aggregate amount equal, as to any class or series, to at least three semi-annual or six quarterly dividend periods, as applicable, (whether consecutive or not) (a “Nonpayment”), the authorized number of directors constituting the Board of Directors shall be increased by two, and the Holders, together with holders of dividend parity stock, shall have the right, voting separately as a single class without regard to class or series (and with voting rights allocated pro rata based on the liquidation preference of each such class or series), to the exclusion of the holders of Common Stock, to elect two directors of the Company to fill such newly created directorships (and to fill any vacancies in the terms of such directorships), provided that it shall be a qualification for election of any such director that the election of such director shall not cause the Company to violate the corporate governance requirements of the New York Stock Exchange (or other exchange on which the Company’s securities may be listed) that listed companies must have a majority of independent directors and further provided that the Board of Directors shall at no time include more than two such directors. Each such director elected by the Holders together with holders of dividend parity stock is a “Preferred Stock Director.”
(ii) Election. The election of the Preferred Stock Directors will take place at any annual meeting of stockholders or any special meeting of the Holders and any dividend parity stock, called as provided herein. At any time after the special voting power has vested pursuant to Section 7(b)(i) above, the secretary of the Company may, and upon the written request (addressed to the secretary at the Company’s principal office) of the holders of at least 20% of the voting power of the Series Z Preferred Stock or the holders of at least 20% of the voting power of any series of dividend parity stock then outstanding (with such voting power measured based on the voting power to elect Preferred Stock Directors), must (unless such request is received less than 90 days before the date fixed for the next annual or special meeting of the stockholders of the Company, in which event such election shall be held at such next annual or special meeting of stockholders), call a special meeting of the holders of Series Z Preferred Stock and any dividend parity stock for the purposes of electing Preferred Stock Directors. The Preferred Stock Directors shall each be entitled to one vote per director on any matter.
(iii) Notice of Special Meeting. Notice for a special meeting to elect Preferred Stock Directors will be given in a similar manner to that provided in the Company’s by-laws for a special meeting of the stockholders. If the secretary of the Company does not call a special meeting within 20 days after receipt of any such request, then any Holder may (at the expense of the Company) call such meeting, upon notice as provided in this Section 7(b)(iii), and for that purpose will have access to the stock register of the Company. The Preferred Stock Directors
elected at any such special meeting and each Preferred Stock Director elected at a subsequent annual or special meeting of stockholders, will be elected for term expiring upon the earlier of the Preferred Stock Director Termination Date and the next annual meeting of stockholders following such Preferred Stock Director's election. In case any vacancy in the office of a Preferred Stock Director occurs (other than prior to the initial election of the Preferred Stock Directors), the vacancy may be filled by the Preferred Stock Director remaining in office, or if none remains in office, by a plurality of the votes cast by the holders of Series Z Preferred Stock and any dividend parity stock, voting together as a single class, and the Preferred Stock Director so appointed or elected to fill such vacancy shall serve for a term expiring at the next annual meeting of the stockholders. Preferred Stock Directors may only be elected by the holders of Series Z Preferred Stock and dividend parity stock in accordance with this Section 7. If the holders of Series Z Preferred Stock and such dividend parity stock fail to elect a sufficient number of directors to fill all directorships for which they are entitled to elect directors pursuant to this Section 7, then any directorship not so filled shall remain vacant until such time as the holders of Series Z Preferred Stock and such dividend parity stock elect a person to fill such directorship in accordance with this Section 7, or such vacancy is otherwise filled in accordance with this Section 7; and no such directorship may be filled by stockholders of the Company other than in accordance with this Section 7.
(iv) Termination; Removal. Whenever the Company has paid noncumulative dividends in full for at least two consecutive semi-annual or four consecutive quarterly dividend periods following a Nonpayment on the Series Z Preferred Stock and on any dividend parity stock entitled to noncumulative dividends and has paid cumulative dividends in full on any dividend parity stock entitled to cumulative dividends, then the right of the Holders to elect the Preferred Stock Directors will cease (but subject always to the same provisions for the vesting of the special voting rights in the case of any similar non-payment of dividends in respect of future dividend periods) (the time of such cessation, the “Preferred Stock Director Termination Date”). Upon a Preferred Stock Director Termination Date, the terms of office of the Preferred Stock Directors will immediately terminate, the persons then serving as Preferred Stock Directors shall immediately cease to be qualified to hold office as Preferred Stock Directors, the Preferred Stock Directors shall cease to be directors of the Company and the number of directors constituting the Board of Directors shall be automatically reduced, without any action by the Board of Directors or the stockholders of the Company, by the number of Preferred Stock Directors authorized immediately prior to such termination. Any Preferred Stock Director may be removed at any time without cause by the holders of a majority of the voting power of outstanding shares of the capital stock then entitled to vote in the election of Preferred Stock Directors, voting together as a single class (with such voting power measured based on the voting power to elect Preferred Stock Directors).
(c) Senior Issuances; Adverse Changes. So long as any shares of Series Z Preferred Stock are outstanding, but subject to the final paragraph of this Section 7(c), in addition to any other vote or consent of holders of the Company’s capital stock required by Delaware law, the vote or consent of the holders of at least two-thirds of the voting power of the Series Z Preferred Stock and the holders of any other preferred stock entitled to vote thereon, voting together as a single class, given in person or by proxy at an annual or special meeting of stockholders, or given in writing without a meeting, will be necessary for effecting or validating any of the following actions, whether or not such approval is required by Delaware law:
(i) any amendment, alteration or repeal of any provision of the Company’s certificate of incorporation (including the certificate of designations creating the Series Z Preferred Stock) or the Company’s by-laws that would alter or change the voting powers, preferences, economic rights or special rights of the Series Z Preferred Stock so as to affect them adversely;
(ii) any amendment or alteration of the Company’s certificate of incorporation to authorize or create, or increase the authorized amount of, any shares of, or any securities convertible into shares of, any class or series of the Company's capital stock ranking prior to the Series Z Preferred Stock in the payment of dividends or in the distribution of assets on any liquidation, dissolution, or winding up of the Company; or
(iii) the consummation of a binding share exchange or reclassification involving the Series Z Preferred Stock or a merger or consolidation of the Company with another entity, except that holders of Series Z Preferred Stock will have no right to vote under this provision or otherwise under Delaware law if in each case (i) the Series Z Preferred Stock remains outstanding or, in the case of any such merger or consolidation with respect to which the Company is not the surviving or resulting entity, is converted into or exchanged for preferred securities of the surviving or resulting entity or its ultimate parent, that is an entity organized and existing under the laws of the United States of America, any state thereof or the District of Columbia and that is a corporation for U.S. federal income tax purposes (or if such entity is not a corporation, the Company having received an opinion of nationally recognized counsel experienced in such matters to the effect that Holders will be subject to tax for U.S. federal income tax purposes with respect to such new preferred securities after such merger or consolidation in the same amount, at the same time and otherwise in the same manner as would have been the case under the Series Z Preferred Stock prior to such merger or consolidation), and (ii) such Series Z Preferred Stock remaining outstanding or such preferred securities, as the case may be, have such rights, preferences, privileges and voting powers, taken as a whole, as are not materially less favorable to the holders thereof than the rights, preferences, privileges and voting powers of the Series Z Preferred Stock, taken as a whole;
provided, however, that, for the avoidance of doubt, any increase in the amount of the authorized or issued Series Z Preferred Stock or authorized preferred stock or any securities convertible into preferred stock or the creation and issuance, or an increase in the authorized or issued amount, of other series of preferred stock or any securities convertible into preferred stock ranking equally with and/or junior to the Series Z Preferred Stock with respect to the payment of dividends (whether such dividends are cumulative or noncumulative) and/or the distribution of assets upon the Company’s liquidation, dissolution or winding up will not be deemed to adversely affect the voting powers, preferences or special rights of the Series Z Preferred Stock, and no stockholder will have the right to vote on such an increase, creation or issuance by reason of this Section 7.
If any amendment, alteration, repeal, share exchange, reclassification, merger or consolidation specified in this Section 7(c) would adversely affect one or more but not all series of preferred stock of the Company, then only such series of preferred stock as are adversely affected by and entitled to vote on the matter shall vote on the matter together with the Series Z Preferred Stock as a single class (in lieu of all other series of preferred stock) for purposes of the vote or consent required by this Section 7(c).
(d) No Vote if Redemption. No vote or consent of the Holders shall be required pursuant to Section 7(b) or 7(c) if, at or prior to the time when the act with respect to such vote
or consent would otherwise be required shall be effected, the Company shall have redeemed or shall have called for redemption all outstanding shares of Series Z Preferred Stock, with proper notice and sufficient funds having been set aside for such redemption, in each case pursuant to Section 6 above.
Section 8. Preemption and Conversion Rights.
The Holders shall not have any preemptive rights or conversion rights as a result of the terms hereof.
Section 9. Rank.
For the avoidance of doubt, the Board of Directors or any duly authorized committee thereof may, without the vote of the Holders, authorize and issue additional shares of Junior Stock or shares of any class or series of stock of the Company now existing or hereafter authorized that ranks equally with the Series Z Preferred Stock in the payment of dividends or in the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the Company.
Section 10. Reacquired Shares.
The Board of Directors shall take such actions as are necessary to cause the shares of Series Z Preferred Stock which have been redeemed or otherwise purchased or acquired by the Company to be retired and restored to the status of authorized but unissued shares of preferred stock without designation as to series.
Section 11. No Sinking Fund.
Shares of Series Z Preferred Stock are not subject to the operation of a sinking fund.
Section 12. Transfer Agent, Calculation Agent, Registrar and Paying Agent.
The duly appointed Transfer Agent, Calculation Agent, Registrar and paying agent for the Series Z Preferred Stock shall be Computershare Trust Company, N.A. The Company may, in its sole discretion, remove the Transfer Agent and/or the Calculation Agent in accordance with the agreements between the Company and the Transfer Agent; provided, however, that the Company shall appoint a successor transfer agent and/or calculation agent who shall accept such appointment prior to the effectiveness of such removal. Upon any such removal or appointment, the Company shall send notice thereof by first-class mail, postage prepaid, to the Holders.
Section 13. Replacement Certificates for Mutilated, Destroyed, Stolen and Lost Certificates.
If physical certificates are issued, the Company shall replace any mutilated certificate at the Holder’s expense upon surrender of that certificate to the Transfer Agent. The Company shall replace certificates that become destroyed, stolen or lost at the Holder’s expense upon delivery to the Company and the Transfer Agent of satisfactory evidence that the certificate has been destroyed, stolen or lost, together with any indemnity that may be required by the Transfer Agent and the Company.
Section 14. Form.
(a) Series Z Preferred Stock Certificates. Series Z Preferred Stock shall be issued in certificated form in substantially the form attached hereto as Exhibit A (each, a “Series Z Preferred Stock Certificate”). Exhibit A is hereby incorporated in and expressly made a part of this Certificate of Designations. The Series Z Preferred Stock Certificates may have notations, legends or endorsements required by law, stock exchange rules, agreements to which the Company is subject, if any, or usage (provided that any such notation, legend or endorsement is in a form acceptable to the Company).
(b) Signature. Two Officers shall sign any Series Z Preferred Stock Certificate for the Company, in accordance with the Company’s by-laws and applicable law, by manual or facsimile signature. If an Officer whose signature is on a Series Z Preferred Stock Certificate no longer holds that office at the time the Transfer Agent countersigned the Series Z Preferred Stock Certificate, such Series Z Preferred Stock Certificate shall be valid nevertheless. A Series Z Preferred Stock Certificate shall not be valid until an authorized signatory of the Transfer Agent manually countersigns such Series Z Preferred Stock Certificate. Each Series Z Preferred Stock Certificate shall be dated the date of its countersignature.
Section 15. Taxes.
(a) Transfer Taxes. The Company shall pay any and all stock transfer, documentary, stamp and similar taxes that may be payable in respect of any issuance or delivery of shares of Series Z Preferred Stock. The Company shall not, however, be required to pay any such tax that may be payable in respect of any transfer involved in the issuance or delivery of shares of Series Z Preferred Stock, in a name other than that in which the shares of Series Z Preferred Stock were registered, or in respect of any payment to any Person other than a payment to the registered holder thereof, and shall not be required to make any such issuance, delivery or payment unless and until the Person otherwise entitled to such issuance, delivery or payment has paid to the Company the amount of any such tax or has established, to the satisfaction of the Company, that such tax has been paid or is not payable.
(b) Withholding. All payments and distributions (or deemed distributions) on the shares of Series Z Preferred Stock shall be subject to withholding and backup withholding of tax to the extent required by law, subject to applicable exemptions, and amounts withheld, if any, shall be treated as received by Holders.
Section 16. Notices.
All notices referred to herein shall be in writing, and, unless otherwise specified herein, all notices hereunder shall be deemed to have been given upon the earlier of receipt thereof or three business days after the mailing thereof if sent by registered or certified mail (unless first class mail shall be specifically permitted for such notice under the terms of this Certificate of Designations) with postage prepaid, addressed: (i) if to the Company, to its office at 388 Greenwich Street, New York, New York 10013 (Attention: Corporate Secretary) or to the Transfer Agent at its office at 150 Royall Street, Canton, Massachusetts 02021, or other agent of the Company designated as permitted by this Certificate of Designations, or (ii) if to any Holder, to such Holder at the address of such Holder as listed in the stock record books of the Company (which may include the records of the Transfer Agent) or (iii) to such other address as the Company or any such Holder, as the case may be, shall have designated by notice similarly given.
Section 17. Other Rights Disclaimed.
The shares of Series Z Preferred Stock have no voting powers, preferences or relative, participating, optional or other special rights, or qualifications, limitations or restrictions thereof, other than as set forth herein or in the Certificate of Incorporation of the Company.
IN WITNESS WHEREOF, this Certificate of Designations has been executed on behalf of the Company by its Treasurer this 6th day of March, 2023.
CITIGROUP INC.
By: _/s/ Michael Verdeschi_______________
Name: Michael Verdeschi
Title: Treasurer
Exhibit A
FORM OF 7.375% FIXED RATE RESET NONCUMULATIVE PREFERRED STOCK, SERIES Z
Certificate Number_______ Number of Shares of Series Z Preferred Stock______
CUSIP NO.:
CITIGROUP INC.
7.375% Fixed Rate Reset Noncumulative Preferred Stock, Series Z
(par value $1.00 per share) (liquidation preference $25,000 per share)
Citigroup Inc., a Delaware corporation (the “Company”), hereby certifies that [ ] (the “Holder”) is the registered owner of [ ] fully paid and non-assessable shares of the Company’s designated 7.375% Fixed Rate Reset Noncumulative Preferred Stock, Series Z, with a par value of $1.00 per share and a liquidation preference of $25,000 per share (the “Series Z Preferred Stock”). The shares of Series Z Preferred Stock are transferable on the books and records of the Registrar, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer. The designations, rights, privileges, restrictions, preferences and other terms and provisions of the Series Z Preferred Stock represented hereby are and shall in all respects be subject to the provisions of the Certificate of Designations dated March 6, 2023 as the same may be amended from time to time (the “Certificate of Designations”). Capitalized terms used herein but not defined shall have the meaning given them in the Certificate of Designations. The Company will provide a copy of the Certificate of Designations to a Holder without charge upon written request to the Company at its principal place of business.
Reference is hereby made to select provisions of the Series Z Preferred Stock set forth on the reverse hereof, and to the Certificate of Designations, which select provisions and the Certificate of Designations shall for all purposes have the same effect as if set forth at this place.
Upon receipt of this certificate, the Holder is bound by the Certificate of Designations and is entitled to the benefits thereunder.
Unless the Registrar has properly countersigned, these shares of Series Z Preferred Stock shall not be entitled to any benefit under the Certificate of Designations or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, this certificate has been executed on behalf of the Company by its [Title] and by its [Title] this __ day of _______, ________.
CITIGROUP INC.
By: _______________________________________ Name: Title:
By: _______________________________________ Name: Title:
REGISTRAR’S COUNTERSIGNATURE
These are shares of Series Z Preferred Stock referred to in the within-mentioned Certificate of Designations.
Dated:
COMPUTERSHARE TRUST COMPANY, N.A., as Registrar
By: _______________________________________ Name: Title:
REVERSE OF CERTIFICATE
Dividends on each share of Series Z Preferred Stock shall be payable at the rate provided in the Certificate of Designations.
The shares of Series Z Preferred Stock shall be redeemable at the option of the Company in the manner and in accordance with the terms set forth in the Certificate of Designations.
The Company shall furnish without charge to each holder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class or Series of share capital issued by the Company and the qualifications, limitations or restrictions of such preferences and/or rights.
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers the shares of Series Z Preferred Stock evidenced hereby to:
___________________________________________________
___________________________________________________
(Insert assignee’s social security or taxpayer identification number, if any)
___________________________________________________
___________________________________________________
(Insert address and zip code of assignee)
and irrevocably appoints:
___________________________________________________
___________________________________________________
as agent to transfer the shares of Series Z Preferred Stock evidenced hereby on the books of the Transfer Agent. The agent may substitute another to act for him or her.
Date:
Signature:
___________________________________________________
(Sign exactly as your name appears on the other side of this Certificate)
Signature Guarantee: ___________________________________________________
(Signature must be guaranteed by an “eligible guarantor institution” that is a bank, stockbroker, savings and loan association or credit union meeting the requirements of the Transfer Agent, which requirements include membership or participation in the Securities Transfer Agents Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Transfer Agent in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.)
CERTIFICATE OF RETIREMENT
OF PREFERRED STOCK
OF CITIGROUP INC.
(Pursuant to Section 243 of the General
Corporation Law of the State of Delaware)
CITIGROUP INC., a corporation duly organized and existing under the General Corporation Law of the State of Delaware, certifies as follows:
FIRST: Citigroup's Restated Certificate of Incorporation, as amended (the "Certificate of Incorporation"), authorizes the issuance of 30,000 shares of 5.90% Fixed Rate / Floating Rate Non-Cumulative Preferred Stock, Series B (the "Preferred Stock, Series B"), each such share with $1.00 par value and a stated value of $25,000 per share.
SECOND: Citigroup has retired all of the authorized shares of the Preferred Stock, Series B.
THIRD: Pursuant to the provisions of Section 243 of the General Corporation Law of the State of Delaware, the shares that were designated to Preferred Stock, Series B are hereby returned to the status of authorized but unissued shares of the Preferred Stock of Citigroup Inc.
IN WITNESS WHEREOF, CITIGROUP INC. has caused this certificate to be signed by the below duly authorized Assistant Treasurer this 5th day of September, 2023.
CITIGROUP INC.
By:/s/ Elissa Steinberg_____________
Elissa Steinberg
Assistant Treasurer
CERTIFICATE OF DESIGNATIONS
OF
7.625% FIXED RATE RESET NONCUMULATIVE PREFERRED STOCK SERIES AA
OF
CITIGROUP INC.
______________________________
pursuant to Section 151 of the
General Corporation Law of the State of Delaware
______________________________
Citigroup Inc., a Delaware corporation (the “Company”), hereby certifies that:
-
The Restated Certificate of Incorporation of the Company \(as amended through the date hereof, the “Certificate of Incorporation”\) fixes the total number of shares of all classes of capital stock that the Company shall have the authority to issue at six billion \(6,000,000,000\) shares of common stock, par value $0.01 per share, and thirty million \(30,000,000\) shares of preferred stock, par value $1.00 per share. -
The Certificate of Incorporation expressly grants to the Board of Directors of the Company \(the “Board of Directors”\) authority to provide for the issuance of the shares of preferred stock in series, and to establish from time to time the number of shares to be included in each such series and to fix the designation, powers, preferences and rights of the shares of each such series and the qualifications, limitations or restrictions thereof. -
Pursuant to the authority conferred upon a preferred stock committee \(the “Preferred Stock Committee”\) by the Board of Directors, the Preferred Stock Committee, by action duly taken on September 14, 2023, adopted resolutions \(i\) authorizing the issuance and sale of up to 60,000 shares of the Company’s preferred stock and \(ii\) approving this final form of Certificate of Designations of 7.625% Fixed Rate Reset Noncumulative Preferred Stock, Series AA \(the “Series AA Preferred Stock”\), establishing the number of shares to be included in this Series AA Preferred Stock and fixing the designation, powers, preferences and rights of the shares of this Series AA Preferred Stock and the qualifications, limitations or restrictions thereof as follows:
Section 1. Designation.
The designation of the series of preferred stock shall be “7.625% Fixed Rate Reset Noncumulative Preferred Stock, Series AA”. Each share of Series AA Preferred Stock shall be identical in all respects to every other share of Series AA Preferred Stock.
Section 2. Number of Shares.
The number of authorized shares of Series AA Preferred Stock shall be 60,000. That number from time to time may be increased (but not in excess of the total number of authorized shares of preferred stock) or decreased (but not below the number of shares of Series AA Preferred Stock then outstanding) by further resolution duly adopted by the Board of Directors, the Preferred Stock Committee or any other duly authorized committee thereof and by the filing of a certificate pursuant to the provisions of the General Corporation Law of the State of Delaware stating that such increase or reduction, as the case may be, has been so authorized. The Company shall have the authority to issue fractional shares of Series AA Preferred Stock.
Section 3. Definitions. As used herein with respect to Series AA Preferred Stock:
“Appropriate Federal Banking Agency” means the “appropriate Federal banking agency” with respect to the Company as that term is defined in Section 3(q) of the Federal Deposit Insurance Act of 1950, as amended, or any successor provision.
“Board of Directors” has the meaning set forth in the recitals above.
“business day” means any weekday that is not a legal holiday in New York City and is not a day on which banking institutions in New York City are authorized or required by law or regulation to be closed.
“Calculation Agent” means the Transfer Agent acting in its capacity as calculation agent
for the Series AA Preferred Stock, and its successors and assigns.
“Common Stock” means the common stock of the Company, par value $0.01 per share, or any other shares of the capital stock of the Company into which such shares of common stock shall be reclassified or changed.
“Depositary” means DTC or its nominee or any successor depositary appointed by the Company.
“dividend payment date” shall have the meaning set forth in Section 4(a) hereof.
“dividend period” shall have the meaning set forth in Section 4(a) hereof.
“Dividend Record Date” shall have the meaning set forth in Section 4(a) hereof.
“DTC” means The Depository Trust Company.
“First Reset Date” shall have the meaning set forth in Section 4(a) hereof.
“Holder” means the Person in whose name the shares of the Series AA Preferred Stock are registered, which may be treated by the Company, Calculation Agent, Transfer Agent, Registrar and paying agent as the absolute owner of the shares of Series AA Preferred Stock for the purpose of making payment and for all other purposes.
“Junior Stock” means the Common Stock and any other class or series of stock of the
Company now existing or hereafter authorized over which Series AA Preferred Stock has
preference or priority in the payment of dividends or in the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the Company.
“Nonpayment” shall have the meaning set forth in Section 7(b)(i) hereof.
“NY Federal Reserve’s website” shall have the meaning set forth in Section 4(a) hereof.
“Officer” means the Chief Executive Officer, the Chairman, the Chief Administrative Officer, any Vice Chairman, the Chief Financial Officer, the Controller, the Chief Accounting Officer, the Treasurer, any Deputy Treasurer, any Assistant Treasurer, any Vice President, the General Counsel and Corporate Secretary and any Assistant Secretary of the Company.
“Person” means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint-stock company, limited liability company, trust, or other entity.
“Preferred Stock Director” shall have the meaning set forth in Section 7(b)(i) hereof.
“Preferred Stock Director Termination Date” shall have the meaning set forth in Section 7(b)(iv) hereof.
“Registrar” means the Transfer Agent acting in its capacity as registrar for the Series AA Preferred Stock, and its successors and assigns.
“Regulatory Capital Event” means the good faith determination by the Company that, as a result of (i) any amendment to, clarification of, or change in, the laws or regulations of the United States (including, for the avoidance of doubt, any agency or instrumentality of the United States, including the Federal Reserve and other federal bank regulatory agencies) or any political subdivision of or in the United States that is enacted or becomes effective after the initial issuance of any share of the Series AA Preferred Stock, (ii) any proposed change in those laws or regulations that is announced or becomes effective after the initial issuance of any share of the Series AA Preferred Stock, or (iii) any official administrative decision or judicial decision or administrative action or other official pronouncement interpreting or applying those laws or regulations or policies with respect thereto that is announced after the initial issuance of any share of the Series AA Preferred Stock, there is more than an insubstantial risk that the Company will not be entitled to treat the full liquidation preference amount of $25,000 per share of the Series AA Preferred Stock then outstanding as “tier 1 capital” (or its equivalent) for purposes of the capital adequacy guidelines of the Federal Reserve (or, as and if applicable, the capital adequacy guidelines or regulations of any successor Appropriate Federal Banking Agency) as then in effect and applicable, for so long as any share of the Series AA Preferred Stock is outstanding.
“Relevant Governmental Body” shall have the meaning set forth in Section 4(a) hereof.
“reset date” means the First Reset Date and each date falling on the fifth anniversary of the preceding reset date, and no reset date, including the First Reset Date, will be adjusted for business days.
“reset dividend determination date” means, in respect of any reset period, the day that is three business days prior to the beginning of such reset period.
“reset period” means the period from, and including, each reset date to, but excluding, the next succeeding reset date, except for the initial reset period, which will be the period from, and including, the First Reset Date to, but excluding, the next succeeding reset date.
“Series AA Liquidation Preference” shall have the meaning set forth in Section 5(a) hereof.
“Series AA Preferred Stock” shall have the meaning set forth in Section 1 hereof.
“Series AA Preferred Stock Certificate” shall have the meaning set forth in Section 14(a) hereof.
“Transfer Agent” means Computershare Trust Company, N.A., a federally chartered national association, acting as Transfer Agent, Calculation Agent, Registrar and paying agent for the Series AA Preferred Stock, and its successors and assigns.
“Trust” shall have the meaning set forth in Section 6(d).
Section 4. Dividends.
a.Rate. Holders shall be entitled to receive, when, as and if declared by the Board of Directors or any duly authorized committee thereof, but only out of funds legally available therefor, noncumulative cash dividends on each share of Series AA Preferred Stock in the amounts specified below in this Section 4, and no more, payable on the 15th of each February, May, August and November (each, a “dividend payment date”), (i) quarterly in arrears from, and including, the date of issuance to, but excluding, November 15, 2028 (the “First Reset Date”), at an annual rate of 7.625% on the liquidation preference of $25,000 per share, beginning on February 15, 2024, and (ii) from, and including the First Reset Date, for each reset period, at an annual rate equal to the five-year treasury rate as of the most recent reset dividend determination date (as described below) plus 3.211% on the liquidation preference of $25,000 per share, quarterly in arrears, beginning on February 15, 2029.
The record date for payment of dividends on the Series AA Preferred Stock will be the record date fixed by the Board of Directors or any other duly authorized committee thereof that is not more than 30 nor less than 10 days prior to such dividend payment date (each, a “Dividend Record Date”). Any such day that is a Dividend Record Date will be a Dividend Record Date whether or not such day is a business day.
For any reset period beginning on or after the First Reset Date, the five-year treasury rate will be:
• The average of the yields on actively traded U.S. treasury securities adjusted to constant maturity, for five-year maturities, for the five business days appearing under the caption “Treasury Constant Maturities’’ in the most recently published statistical release designated H.15 Daily Update or any successor publication which is published by the Federal Reserve Board as of 5:00 p.m. (Eastern Time) as of any date of determination, as determined by the Calculation Agent in its sole discretion.
• If no calculation is provided as described above, then the Company (or such affiliate) will use a substitute or successor rate that it has determined, in its sole discretion after consulting any source it deems to be reasonable, is (i) the industry-accepted substitute or successor for the five-year treasury rate or (ii) if there is no such industry-accepted substitute or successor for the five-year treasury rate, a substitute or successor rate that is most comparable to the five-year treasury rate. Upon selection of a substitute or
successor rate, the Company (or such affiliate) may determine, in its sole discretion after consulting any source it deems to be reasonable, the day count convention, the business day convention, the definition of business day, the reset dividend determination date and any other relevant methodology or definition for calculating such substitute or successor rate, including any adjustment factor it determines is needed to make such substitute or successor rate comparable to the five-year treasury rate, in a manner that is consistent with any industry-accepted practices for such substitute or successor rate.
The five-year treasury rate will be determined on each reset dividend determination date.
With respect to any dividend period, any dividends on the Series AA Preferred Stock will be calculated on the basis of a 360-day year of twelve 30-day months, and “dividend period” means the period from, and including, each dividend payment date to, but excluding, the next succeeding dividend payment date, except for the initial dividend period, which will be the period from, and including, the date of issuance of the Series AA Preferred Stock to, but excluding, the first dividend payment date. In the event that any dividend payment date is not a business day, then payment of any dividend payable on such date will be made on the next succeeding business day and without any additional dividend accrual or other payment in respect of any such postponement.
Any determination, decision or election that may be made by the Company (or one of its affiliates) pursuant to the provisions described above, including any determination with respect to tenor, rate or adjustment or of the occurrence or non-occurrence of an event, circumstance or date and any decision to take or refrain from taking any action or any selection, will be conclusive and binding absent manifest error, will be made in the Company’s (or such affiliate’s) sole discretion, and, notwithstanding anything to the contrary in this Certificate of Designations, shall become effective without consent from the holders of the Series AA Preferred Stock or any other party.
All percentages resulting from any calculation of the dividend rate will be rounded, if necessary, to the nearest 1/100,000 of 1% (.0000001), with five one-millionths of a percentage point rounded upward. All currency amounts used in, or resulting from, the calculation on the Series AA Preferred Stock will be rounded to the nearest one-hundredth of a unit. For purposes of rounding, .005 of a unit shall be rounded upward.
(b) Noncumulative Dividends. If the Board of Directors or any duly authorized committee thereof does not declare a dividend on the Series AA Preferred Stock for any dividend period prior to the related dividend payment date, that dividend will not accrue, and the Company will have no obligation to pay, and Holders shall have no right to receive, a dividend for that dividend period on the related dividend payment date or at any future time, whether or not dividends on the Series AA Preferred Stock or any other series of preferred stock or common stock are declared for any subsequent period. References herein to the “accrual” of dividends refer only to the determination of the amount of such dividend and do not imply that any right to a dividend arises prior to the date on which a dividend is declared.
(c) Priority of Dividends. So long as any share of Series AA Preferred Stock remains outstanding, unless as to a dividend payment date full dividends on all outstanding shares of the Series AA Preferred Stock have been declared and paid or declared and a sum sufficient for the payment of those dividends has been set aside for the dividend period then ending, the Company will not, and will cause its subsidiaries not to, during the next succeeding dividend period, declare or pay any dividend on, make any distributions relating to, or redeem, purchase, acquire or make a liquidation payment relating to, any Junior Stock, or make any guarantee payment with respect thereto, other than:
(i) purchases, redemptions or other acquisitions of shares of Junior Stock in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of employees, officers, directors or consultants;
(ii) purchases of shares of Common Stock pursuant to a contractually binding requirement to buy stock existing prior to the commencement of the then-current dividend period, including under a contractually binding stock repurchase plan;
(iii) as a result of an exchange or conversion of any class or series of Junior Stock for any other class or series of Junior Stock;
(iv) the purchase of fractional interests in shares of Junior Stock pursuant to the conversion or exchange provisions of such Junior Stock or the security being converted or exchanged;
(v) the purchase of Junior Stock by an investment banking subsidiary of the Company in connection with the distribution thereof; or
(vi) the purchase of Junior Stock by any investment banking subsidiary of the Company in connection with market-making or other secondary market activities in the ordinary course of the business of such subsidiary.
The restrictions set forth in the preceding provisions of this Section 4(c) shall not apply to any Junior Stock dividends paid by the Company where the dividend is in the form of the same stock (or the right to buy the same stock) as that on which the dividend is being paid.
Except as provided below, for so long as any share of Series AA Preferred Stock remains outstanding, if dividends are not declared and paid in full upon the shares of Series AA Preferred Stock and any class or series of stock of the Company now existing or hereafter authorized that ranks equally with the Series AA Preferred Stock in the payment of dividends, all dividends declared upon shares of Series AA Preferred Stock and such other stock will be declared on a proportional basis so that the amount of dividends declared per share will bear to each other the same ratio that accrued dividends for the then-current dividend period per share of Series AA Preferred Stock and accrued dividends for the then-current dividend period per share of such other stock (including, in the case of any such other stock that bears cumulative dividends, all accrued and unpaid dividends) bear to each other.
Subject to the foregoing, and not otherwise, such dividends payable in cash, stock or otherwise, as may be determined by the Board of Directors or any duly authorized committee thereof, may be declared and paid on any other class or series of stock of the Company from time to time out of any funds legally available for such payment, and Holders will not be entitled to participate in those dividends.
Section 5. Liquidation Rights.
(a) Liquidation. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company, Holders shall be entitled, out of funds legally available therefor, before any distribution or payment may be made by the Company or set aside for the holders of any Junior Stock and subject to the rights of the holders of any class or series of stock ranking senior to or on parity with Series AA Preferred Stock upon liquidation and the rights of the Company’s depositors and other creditors, to receive in full a liquidating distribution in the
amount of the liquidation preference of $25,000 per share (the “Series AA Liquidation Preference”), plus any accrued dividends thereon from the last dividend payment date to, but excluding, the date of the liquidation, dissolution or winding up if and to the extent declared but not yet paid. Holders shall not be entitled to any further payments in the event of any such voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company other than what is expressly provided for in this Section 5.
(b) Partial Payment. If the assets of the Company are not sufficient to pay in full the aforesaid liquidation distributions to the Holders and any liquidation distributions owed to holders of any class or series of stock of the Company ranking equally with the Series AA Preferred Stock in the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the Company, the amounts paid to the Holders and to the holders of all such equally ranking stock shall be pro rata in accordance with the respective aggregate liquidating distributions to which they would otherwise be entitled.
(c) Merger, Consolidation and Sale of Assets Not Liquidation. For purposes of this Section 5, the sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the property and assets of the Company shall not be deemed a voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, nor shall the merger, consolidation or any other business combination transaction of the Company into or with any other corporation or Person or the merger, consolidation or any other business combination transaction of any other corporation or Person into or with the Company be deemed to be a voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company.
Section 6. Redemption.
(a) Optional Redemption. The Company, at the option of its Board of Directors or any duly authorized committee thereof, may redeem out of funds legally available therefor, (i) in whole at any time or in part, from time to time, the shares of Series AA Preferred Stock at the time outstanding, on any dividend payment date beginning on or after the First Reset Date, or (ii) in whole but not in part at any time within 90 days following a Regulatory Capital Event, in each case at a redemption price equal to $25,000 per share plus any declared and unpaid dividends, without accumulation of any undeclared dividends, to, but excluding, the redemption date, upon notice given as provided in Section 6(b) below.
(b) Notice of Redemption. Notice of every redemption of shares of Series AA Preferred Stock shall be mailed by first class mail, postage prepaid, addressed to the Holders of such shares to be redeemed at their respective last addresses appearing on the stock register of the Company. Such mailing shall be at least 5 days and not more than 30 days before the date fixed for redemption. Any notice mailed as provided in this Section 6(b) shall be conclusively presumed to have been duly given, whether or not the Holder receives such notice, but failure duly to give such notice by mail, or any defect in such notice or in the mailing thereof, to any Holder of shares of Series AA Preferred Stock designated for redemption shall not affect the validity of the proceedings for the redemption of any other shares of Series AA Preferred Stock. Each notice shall state:
(i) the redemption date;
(ii) the total number of shares of Series AA Preferred Stock to be redeemed and, if fewer than all the shares of a Holder are to be redeemed, the number of such shares to be redeemed;
(iii) the redemption price;
(iv) the place or places where the certificates for such shares are to be surrendered for payment of the redemption price, if applicable; and
(v) that dividends on the shares to be redeemed will cease to accrue on the redemption date.
Notwithstanding the foregoing, if the certificates evidencing the shares of Series AA Preferred Stock are held of record by a depositary and any related depository shares are held of record by a Depositary or its nominee, the Company may give such notice in any manner permitted by the Depositary.
(c) Partial Redemption. In case of any redemption of only part of the shares of Series AA Preferred Stock at the time outstanding, the shares of Series AA Preferred Stock to be redeemed shall be selected (i) pro rata from the Holders in proportion to the number of shares of Series AA Preferred Stock held by such Holders, (ii) by lot or (iii) in such other manner as the Board of Directors or any duly authorized committee thereof may determine, in its sole discretion, to be fair and equitable. Subject to the provisions of this Section 6, the Board of Directors or any duly authorized committee thereof shall have full power and authority to prescribe the terms and conditions upon which shares of Series AA Preferred Stock shall be redeemed from time to time.
(d) Effectiveness of Redemption. If notice of redemption has been duly given and if on or before the redemption date specified in the notice all funds necessary for the redemption have been set aside by the Company, separate and apart from its other assets, for the pro rata benefit of the Holders of the shares called for redemption, so as to be and continue to be available therefor, or deposited by the Company with a bank or trust company selected by the Board of Directors or any duly authorized committee thereof (the “Trust”) in trust for the pro rata benefit of the Holders of the shares called for redemption, then, notwithstanding that any certificate for any share so called for redemption has not been surrendered for cancellation, on and after the redemption date all shares so called for redemption shall cease to be outstanding, all dividends with respect to such shares shall cease to accrue on such redemption date, and all rights with respect to such shares shall forthwith on such redemption date cease and terminate, except only the right of the Holders thereof to receive the amount payable on such redemption from the Trust at any time after the redemption date from the funds so deposited, without interest. The Company shall be entitled to receive, from time to time, from the Trust any interest accrued on such funds, and the Holders of any shares called for redemption shall have no claim to any such interest. Any funds so deposited and unclaimed at the end of three years from the redemption date shall, to the extent permitted by law, be released or repaid to the Company, and in the event of such repayment to the Company, the Holders of the shares so called for redemption shall be deemed to be unsecured creditors of the Company for an amount equivalent to the amount deposited as stated above for the redemption of such shares and so repaid to the Company, but shall in no event be entitled to any interest.
Section 7. Voting Rights.
(a) General. The Holders shall not be entitled to vote on any matter except as set forth in Section 7(b) below or as required by the Delaware General Corporation Law.
(b) Special Voting Right.
(i) Voting Right. If and whenever dividends on the Series AA Preferred Stock or any other class or series of preferred stock that ranks on parity with the Series AA Preferred Stock as to payment of dividends and upon which voting rights equivalent to those granted by this Section 7(b)(i) have been conferred and are exercisable (any such class or series being referred to herein as “dividend parity stock”) have not been declared and paid in an aggregate amount equal, as to any class or series, to at least three semi-annual or six quarterly dividend periods, as applicable, (whether consecutive or not) (a “Nonpayment”), the authorized number of directors constituting the Board of Directors shall be increased by two, and the Holders, together with holders of dividend parity stock, shall have the right, voting separately as a single class without regard to class or series (and with voting rights allocated pro rata based on the liquidation preference of each such class or series), to the exclusion of the holders of Common Stock, to elect two directors of the Company to fill such newly created directorships (and to fill any vacancies in the terms of such directorships), provided that it shall be a qualification for election of any such director that the election of such director shall not cause the Company to violate the corporate governance requirements of the New York Stock Exchange (or other exchange on which the Company’s securities may be listed) that listed companies must have a majority of independent directors and further provided that the Board of Directors shall at no time include more than two such directors. Each such director elected by the Holders together with holders of dividend parity stock is a “Preferred Stock Director.”
(ii) Election. The election of the Preferred Stock Directors will take place at any annual meeting of stockholders or any special meeting of the Holders and any dividend parity stock, called as provided herein. At any time after the special voting power has vested pursuant to Section 7(b)(i) above, the secretary of the Company may, and upon the written request (addressed to the secretary at the Company’s principal office) of the holders of at least 20% of the voting power of the Series AA Preferred Stock or the holders of at least 20% of the voting power of any series of dividend parity stock then outstanding (with such voting power measured based on the voting power to elect Preferred Stock Directors), must (unless such request is received less than 90 days before the date fixed for the next annual or special meeting of the stockholders of the Company, in which event such election shall be held at such next annual or special meeting of stockholders), call a special meeting of the holders of Series AA Preferred Stock and any dividend parity stock for the purposes of electing Preferred Stock Directors. The Preferred Stock Directors shall each be entitled to one vote per director on any matter.
(iii) Notice of Special Meeting. Notice for a special meeting to elect Preferred Stock Directors will be given in a similar manner to that provided in the Company’s by-laws for a special meeting of the stockholders. If the secretary of the Company does not call a special meeting within 20 days after receipt of any such request, then any Holder may (at the expense of the Company) call such meeting, upon notice as provided in this Section 7(b)(iii), and for that
purpose will have access to the stock register of the Company. The Preferred Stock Directors elected at any such special meeting and each Preferred Stock Director elected at a subsequent annual or special meeting of stockholders, will be elected for term expiring upon the earlier of the Preferred Stock Director Termination Date and the next annual meeting of stockholders following such Preferred Stock Director's election. In case any vacancy in the office of a Preferred Stock Director occurs (other than prior to the initial election of the Preferred Stock Directors), the vacancy may be filled by the Preferred Stock Director remaining in office, or if none remains in office, by a plurality of the votes cast by the holders of Series AA Preferred Stock and any dividend parity stock, voting together as a single class, and the Preferred Stock Director so appointed or elected to fill such vacancy shall serve for a term expiring at the next annual meeting of the stockholders. Preferred Stock Directors may only be elected by the holders of Series AA Preferred Stock and dividend parity stock in accordance with this Section 7. If the holders of Series AA Preferred Stock and such dividend parity stock fail to elect a sufficient number of directors to fill all directorships for which they are entitled to elect directors pursuant to this Section 7, then any directorship not so filled shall remain vacant until such time as the holders of Series AA Preferred Stock and such dividend parity stock elect a person to fill such directorship in accordance with this Section 7, or such vacancy is otherwise filled in accordance with this Section 7; and no such directorship may be filled by stockholders of the Company other than in accordance with this Section 7.
(iv) Termination; Removal. Whenever the Company has paid noncumulative dividends in full for at least two consecutive semi-annual or four consecutive quarterly dividend periods following a Nonpayment on the Series AA Preferred Stock and on any dividend parity stock entitled to noncumulative dividends and has paid cumulative dividends in full on any dividend parity stock entitled to cumulative dividends, then the right of the Holders to elect the Preferred Stock Directors will cease (but subject always to the same provisions for the vesting of the special voting rights in the case of any similar non-payment of dividends in respect of future dividend periods) (the time of such cessation, the “Preferred Stock Director Termination Date”). Upon a Preferred Stock Director Termination Date, the terms of office of the Preferred Stock Directors will immediately terminate, the persons then serving as Preferred Stock Directors shall immediately cease to be qualified to hold office as Preferred Stock Directors, the Preferred Stock Directors shall cease to be directors of the Company and the number of directors constituting the Board of Directors shall be automatically reduced, without any action by the Board of Directors or the stockholders of the Company, by the number of Preferred Stock Directors authorized immediately prior to such termination. Any Preferred Stock Director may be removed at any time without cause by the holders of a majority of the voting power of outstanding shares of the capital stock then entitled to vote in the election of Preferred Stock Directors, voting together as a single class (with such voting power measured based on the voting power to elect Preferred Stock Directors).
(c) Senior Issuances; Adverse Changes. So long as any shares of Series AA Preferred Stock are outstanding, but subject to the final paragraph of this Section 7(c), in addition to any other vote or consent of holders of the Company’s capital stock required by Delaware law, the vote or consent of the holders of at least two-thirds of the voting power of the Series AA Preferred Stock and the holders of any other preferred stock entitled to vote thereon, voting together as a single class, given in person or by proxy at an annual or special meeting of stockholders, or given in writing without a meeting, will be necessary for effecting or validating any of the following actions, whether or not such approval is required by Delaware law:
(i) any amendment, alteration or repeal of any provision of the Company’s certificate of incorporation (including the certificate of designations creating the Series AA Preferred Stock) or the Company’s by-laws that would alter or change the voting powers, preferences, economic rights or special rights of the Series AA Preferred Stock so as to affect them adversely;
(ii) any amendment or alteration of the Company’s certificate of incorporation to authorize or create, or increase the authorized amount of, any shares of, or any securities convertible into shares of, any class or series of the Company's capital stock ranking prior to the Series AA Preferred Stock in the payment of dividends or in the distribution of assets on any liquidation, dissolution, or winding up of the Company; or
(iii) the consummation of a binding share exchange or reclassification involving the Series AA Preferred Stock or a merger or consolidation of the Company with another entity, except that holders of Series AA Preferred Stock will have no right to vote under this provision or otherwise under Delaware law if in each case (i) the Series AA Preferred Stock remains outstanding or, in the case of any such merger or consolidation with respect to which the Company is not the surviving or resulting entity, is converted into or exchanged for preferred securities of the surviving or resulting entity or its ultimate parent, that is an entity organized and existing under the laws of the United States of America, any state thereof or the District of Columbia and that is a corporation for U.S. federal income tax purposes (or if such entity is not a corporation, the Company having received an opinion of nationally recognized counsel experienced in such matters to the effect that Holders will be subject to tax for U.S. federal income tax purposes with respect to such new preferred securities after such merger or consolidation in the same amount, at the same time and otherwise in the same manner as would have been the case under the Series AA Preferred Stock prior to such merger or consolidation), and (ii) such Series AA Preferred Stock remaining outstanding or such preferred securities, as the case may be, have such rights, preferences, privileges and voting powers, taken as a whole, as are not materially less favorable to the holders thereof than the rights, preferences, privileges and voting powers of the Series AA Preferred Stock, taken as a whole;
provided, however, that, for the avoidance of doubt, any increase in the amount of the authorized or issued Series AA Preferred Stock or authorized preferred stock or any securities convertible into preferred stock or the creation and issuance, or an increase in the authorized or issued amount, of other series of preferred stock or any securities convertible into preferred stock ranking equally with and/or junior to the Series AA Preferred Stock with respect to the payment of dividends (whether such dividends are cumulative or noncumulative) and/or the distribution of assets upon the Company’s liquidation, dissolution or winding up will not be deemed to adversely affect the voting powers, preferences or special rights of the Series AA Preferred Stock, and no stockholder will have the right to vote on such an increase, creation or issuance by reason of this Section 7.
If any amendment, alteration, repeal, share exchange, reclassification, merger or consolidation specified in this Section 7(c) would adversely affect one or more but not all series of preferred stock of the Company, then only such series of preferred stock as are adversely affected by and entitled to vote on the matter shall vote on the matter together with the Series AA Preferred Stock as a single class (in lieu of all other series of preferred stock) for purposes of the vote or consent required by this Section 7(c).
(d) No Vote if Redemption. No vote or consent of the Holders shall be required pursuant to Section 7(b) or 7(c) if, at or prior to the time when the act with respect to such vote
or consent would otherwise be required shall be effected, the Company shall have redeemed or shall have called for redemption all outstanding shares of Series AA Preferred Stock, with proper notice and sufficient funds having been set aside for such redemption, in each case pursuant to Section 6 above.
Section 8. Preemption and Conversion Rights.
The Holders shall not have any preemptive rights or conversion rights as a result of the terms hereof.
Section 9. Rank.
For the avoidance of doubt, the Board of Directors or any duly authorized committee thereof may, without the vote of the Holders, authorize and issue additional shares of Junior Stock or shares of any class or series of stock of the Company now existing or hereafter authorized that ranks equally with the Series AA Preferred Stock in the payment of dividends or in the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the Company.
Section 10. Reacquired Shares.
The Board of Directors shall take such actions as are necessary to cause the shares of Series AA Preferred Stock which have been redeemed or otherwise purchased or acquired by the Company to be retired and restored to the status of authorized but unissued shares of preferred stock without designation as to series.
Section 11. No Sinking Fund.
Shares of Series AA Preferred Stock are not subject to the operation of a sinking fund.
Section 12. Transfer Agent, Calculation Agent, Registrar and Paying Agent.
The duly appointed Transfer Agent, Calculation Agent, Registrar and paying agent for the Series AA Preferred Stock shall be Computershare Trust Company, N.A. The Company may, in its sole discretion, remove the Transfer Agent and/or the Calculation Agent in accordance with the agreements between the Company and the Transfer Agent; provided, however, that the Company shall appoint a successor transfer agent and/or calculation agent who shall accept such appointment prior to the effectiveness of such removal. Upon any such removal or appointment, the Company shall send notice thereof by first-class mail, postage prepaid, to the Holders.
Section 13. Replacement Certificates for Mutilated, Destroyed, Stolen and Lost Certificates.
If physical certificates are issued, the Company shall replace any mutilated certificate at the Holder’s expense upon surrender of that certificate to the Transfer Agent. The Company shall replace certificates that become destroyed, stolen or lost at the Holder’s expense upon delivery to the Company and the Transfer Agent of satisfactory evidence that the certificate has been destroyed, stolen or lost, together with any indemnity that may be required by the Transfer Agent and the Company.
Section 14. Form.
(a) Series AA Preferred Stock Certificates. Series AA Preferred Stock shall be issued in certificated form in substantially the form attached hereto as Exhibit A (each, a “Series AA Preferred Stock Certificate”). Exhibit A is hereby incorporated in and expressly made a part of this Certificate of Designations. The Series AA Preferred Stock Certificates may have notations, legends or endorsements required by law, stock exchange rules, agreements to which the Company is subject, if any, or usage (provided that any such notation, legend or endorsement is in a form acceptable to the Company).
(b) Signature. Two Officers shall sign any Series AA Preferred Stock Certificate for the Company, in accordance with the Company’s by-laws and applicable law, by manual or facsimile signature. If an Officer whose signature is on a Series AA Preferred Stock Certificate no longer holds that office at the time the Transfer Agent countersigned the Series AA Preferred Stock Certificate, such Series AA Preferred Stock Certificate shall be valid nevertheless. A Series AA Preferred Stock Certificate shall not be valid until an authorized signatory of the Transfer Agent manually countersigns such Series AA Preferred Stock Certificate. Each Series AA Preferred Stock Certificate shall be dated the date of its countersignature.
Section 15. Taxes.
(a) Transfer Taxes. The Company shall pay any and all stock transfer, documentary, stamp and similar taxes that may be payable in respect of any issuance or delivery of shares of Series AA Preferred Stock. The Company shall not, however, be required to pay any such tax that may be payable in respect of any transfer involved in the issuance or delivery of shares of Series AA Preferred Stock, in a name other than that in which the shares of Series AA Preferred Stock were registered, or in respect of any payment to any Person other than a payment to the registered holder thereof, and shall not be required to make any such issuance, delivery or payment unless and until the Person otherwise entitled to such issuance, delivery or payment has paid to the Company the amount of any such tax or has established, to the satisfaction of the Company, that such tax has been paid or is not payable.
(b) Withholding. All payments and distributions (or deemed distributions) on the shares of Series AA Preferred Stock shall be subject to withholding and backup withholding of tax to the extent required by law, subject to applicable exemptions, and amounts withheld, if any, shall be treated as received by Holders.
Section 16. Notices.
All notices referred to herein shall be in writing, and, unless otherwise specified herein, all notices hereunder shall be deemed to have been given upon the earlier of receipt thereof or three business days after the mailing thereof if sent by registered or certified mail (unless first class mail shall be specifically permitted for such notice under the terms of this Certificate of Designations) with postage prepaid, addressed: (i) if to the Company, to its office at 388 Greenwich Street, New York, New York 10013 (Attention: Corporate Secretary) or to the Transfer Agent at its office at 150 Royall Street, Canton, Massachusetts 02021, or other agent of the Company designated as permitted by this Certificate of Designations, or (ii) if to any Holder, to such Holder at the address of such Holder as listed in the stock record books of the Company (which may include the records of the Transfer Agent) or (iii) to such other address as the Company or any such Holder, as the case may be, shall have designated by notice similarly given.
Section 17. Other Rights Disclaimed.
The shares of Series AA Preferred Stock have no voting powers, preferences or relative, participating, optional or other special rights, or qualifications, limitations or restrictions thereof, other than as set forth herein or in the Certificate of Incorporation of the Company.
IN WITNESS WHEREOF, this Certificate of Designations has been executed on behalf of the Company by its Treasurer this 20th day of September, 2023.
CITIGROUP INC.
By: __/s/ Michael Verdeschi__________________
Name: Michael Verdeschi
Title: Treasurer
Exhibit A
FORM OF 7.625% FIXED RATE RESET NONCUMULATIVE PREFERRED STOCK, SERIES AA
Certificate Number_______ Number of Shares of Series AA Preferred Stock______
CUSIP NO.:
CITIGROUP INC.
7.625% Fixed Rate Reset Noncumulative Preferred Stock, Series AA
(par value $1.00 per share) (liquidation preference $25,000 per share)
Citigroup Inc., a Delaware corporation (the “Company”), hereby certifies that [ ] (the “Holder”) is the registered owner of [ ] fully paid and non-assessable shares of the Company’s designated 7.625% Fixed Rate Reset Noncumulative Preferred Stock, Series AA, with a par value of $1.00 per share and a liquidation preference of $25,000 per share (the “Series AA Preferred Stock”). The shares of Series AA Preferred Stock are transferable on the books and records of the Registrar, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer. The designations, rights, privileges, restrictions, preferences and other terms and provisions of the Series AA Preferred Stock represented hereby are and shall in all respects be subject to the provisions of the Certificate of Designations dated September 20, 2023 as the same may be amended from time to time (the “Certificate of Designations”). Capitalized terms used herein but not defined shall have the meaning given them in the Certificate of Designations. The Company will provide a copy of the Certificate of Designations to a Holder without charge upon written request to the Company at its principal place of business.
Reference is hereby made to select provisions of the Series AA Preferred Stock set forth on the reverse hereof, and to the Certificate of Designations, which select provisions and the Certificate of Designations shall for all purposes have the same effect as if set forth at this place.
Upon receipt of this certificate, the Holder is bound by the Certificate of Designations and is entitled to the benefits thereunder.
Unless the Registrar has properly countersigned, these shares of Series AA Preferred Stock shall not be entitled to any benefit under the Certificate of Designations or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, this certificate has been executed on behalf of the Company by its [Title] and by its [Title] this __ day of _______, ________.
CITIGROUP INC.
By: _______________________________________ Name: Title:
By: _______________________________________ Name: Title:
REGISTRAR’S COUNTERSIGNATURE
These are shares of Series AA Preferred Stock referred to in the within-mentioned Certificate of Designations.
Dated:
COMPUTERSHARE TRUST COMPANY, N.A., as Registrar
By: _______________________________________ Name: Title:
REVERSE OF CERTIFICATE
Dividends on each share of Series AA Preferred Stock shall be payable at the rate provided in the Certificate of Designations.
The shares of Series AA Preferred Stock shall be redeemable at the option of the Company in the manner and in accordance with the terms set forth in the Certificate of Designations.
The Company shall furnish without charge to each holder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class or Series of share capital issued by the Company and the qualifications, limitations or restrictions of such preferences and/or rights.
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers the shares of Series AA Preferred Stock evidenced hereby to:
___________________________________________________
___________________________________________________
(Insert assignee’s social security or taxpayer identification number, if any)
___________________________________________________
___________________________________________________
(Insert address and zip code of assignee)
and irrevocably appoints:
___________________________________________________
___________________________________________________
as agent to transfer the shares of Series AA Preferred Stock evidenced hereby on the books of the Transfer Agent. The agent may substitute another to act for him or her.
Date:
Signature:
___________________________________________________
(Sign exactly as your name appears on the other side of this Certificate)
Signature Guarantee: ___________________________________________________
(Signature must be guaranteed by an “eligible guarantor institution” that is a bank, stockbroker, savings and loan association or credit union meeting the requirements of the Transfer Agent, which requirements include membership or participation in the Securities Transfer Agents Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Transfer Agent in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.)
Document
BY-LAWS
OF
CITIGROUP INC.
As amended effective November 1, 2023
BY-LAWS
OF
CITIGROUP INC.
ARTICLE I LOCATION
SECTION 1. The location of the registered office of the Company in Delaware shall be in the City of Wilmington, County of New Castle, State of Delaware.
SECTION 2. The Company shall, in addition to the registered office in the State of Delaware, establish and maintain an office within or without the State of Delaware or offices in such other places as the Board of Directors may from time to time find necessary or desirable.
ARTICLE II CORPORATE SEAL
SECTION 1. The corporate seal of the Company shall have inscribed thereon the name of the Company and the words “Incorporated Delaware.”
ARTICLE III MEETINGS OF STOCKHOLDERS
SECTION 1. The annual meeting of the stockholders, or any special meeting thereof, shall be held either in the City of New York, State of New York, or at such other place as may be designated by the Board of Directors or group of Directors calling any special meeting.
SECTION 2. Stockholders entitled to vote may vote at all meetings either in person or by proxy authorized electronically or by an instrument in writing executed in any manner permitted by law or transmission permitted by law. All proxies shall be filed with the Secretary of the meeting before being voted upon.
SECTION 3. A majority in amount of the stock issued, outstanding and entitled to vote represented by the holders in person or by proxy shall be requisite at all meetings to constitute a quorum for the election of Directors or for the transaction of other business except as otherwise provided by law, by the Certificate of Incorporation or by these By-laws. If at any annual or special meeting of the stockholders, a quorum shall fail to attend, a majority in interest attending in person or by proxy may adjourn the meeting from time to time, without notice other than by announcement at the meeting (except as otherwise provided herein) until a quorum shall attend and thereupon any business may be transacted which might have been transacted at the meeting originally called had the same been held at the time so called. If the adjournment is for more than 30 days, or if after the adjournment a new record date is fixed for the adjourned meeting, to the extent required by law a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.
SECTION 4. The annual meeting of the stockholders shall be held on such date and at such time as the Board of Directors may determine by resolution. The business to be transacted at the annual meeting shall include the election of Directors and such other business as may properly come before the meeting. Except as otherwise set forth in the Certificate of Incorporation, each holder of voting stock shall be entitled to one vote for each share of such stock standing registered in his or her name.
SECTION 5. Notice of the annual meeting shall be given by the Secretary to each stockholder entitled to vote, at his or her last known address, at least 10 days but not more than 60 days prior to the meeting.
SECTION 6. Special Meetings.
(a) Special Meetings Called by Chairman or Chief Executive Officer. Special meetings of the stockholders may be called by the Chairman or the Chief Executive Officer. A special meeting shall be called at the request, in writing, of a majority of the Board of Directors or by the vote of the Board of Directors.
(b) Stockholder Requested Special Meetings. A special meeting of stockholders shall be called by the Board upon the written request to the Secretary of record holders of at least fifteen percent of the outstanding common stock of the Company.
(1)A written request for a special meeting of stockholders shall be signed by each record stockholder, or Qualified Representative (as defined below in Section 13) of such record stockholder, requesting a special meeting and shall set forth: (i) a statement of the specific purpose of the meeting and the matters proposed to be acted on at the meeting, the reasons for conducting such business at the meeting, and any material interest in such business of the stockholders requesting the meeting; (ii) the name and address of each such stockholder as it appears on the Company’s stock ledger; (iii) the number of shares of the Company’s common stock owned of record and beneficially by each such stockholder; and (iv) as to each record stockholder making a request and any beneficial owner on whose behalf such stockholder is making such request, the Background Information (as defined below in Section 13). The requirement set forth in clause (iv) of the immediately preceding sentence shall not apply to (A) any stockholder, or beneficial owner, as applicable, who has provided a written request solely in response to a solicitation made pursuant to, and in accordance with, Section 14(a) of the Exchange Act (as defined below in Section 13) by way of a solicitation statement filed on Exchange Act Schedule 14A or (B) any record stockholder that is a broker, bank or custodian (or similar entity) and is acting solely as nominee on behalf of a beneficial owner. A stockholder may revoke the request for a special meeting at any time by written revocation delivered to the Secretary.
(2)Except as provided in the next sentence, a special meeting requested by stockholders shall be held at such date, time and place within or without the state of Delaware as may be fixed by the Board; provided, however, that the date of any such special meeting shall be not more than 90 days after the receipt by the Company of a properly submitted request to call a special meeting from at least fifteen percent of the outstanding common stock of the Company. A special meeting requested by stockholders shall not be held if either (i) the Board has called or calls for an annual meeting of stockholders and the purpose of such annual meeting includes (among any other matters properly brought before the meeting) the purpose specified in the request, or (ii) an annual or special meeting was held not more than 12 months before the request to call the special meeting was received by the Company which included the purpose specified in the request.
(c) Business to be conducted at a special meeting may only be brought before the meeting pursuant to the Company’s notice of meeting; provided however that nothing herein shall prohibit the Board of Directors from submitting matters to the stockholders at any stockholder requested special meeting. The Board of Directors may fix a record date to determine the holders of common stock who are entitled to deliver written requests for a special meeting. If the business to be transacted at a special meeting includes director elections, then stockholder nominations of persons for director election at the special meeting shall be made only as follows. A stockholder who delivered a written request to cause the calling of the special meeting may nominate directors for election only by including, in the request for the special meeting delivered in accordance with Section 6(b)(1) above, a written notice of nomination setting forth the information required by Sections 11(c)(i), (iii), (iv) and (v). For any other stockholder to nominate persons for election to the Board of Directors at any special meeting, such stockholder must comply with the provisions of Section 11 that are applicable to special meetings of stockholders and must deliver to the Company a written notice of nomination setting forth the information required by Sections 11(c)(i), (iii), (iv) and (v) and such notice must be received by the Secretary at the principal executive offices of the Company no later than the later of the 90th day prior to the date such special meeting is first convened or the 10th day after Public Announcement (as defined below in Section 13) is first made of (i) the date of the special meeting and (ii) if the Board of Directors will present nominees for director election at such meeting, of the nominees to be proposed for election by the Board of Directors. In no event shall an adjournment of a special meeting, or postponement of any previously scheduled special meeting of stockholders for which notice has been given (or with respect to which there
has been a Public Announcement of the date of the meeting), commence a new time period (or extend any time period) for the giving of a stockholder’s notice. A person shall not be eligible for election or reelection as a director at a special meeting unless the person is nominated (1) by or at the direction of the Board of Directors or (2) by a record stockholder in accordance with the notice procedures set forth in this paragraph.
SECTION 7. Notice of each special meeting, indicating briefly the object or objects thereof, shall be given by the Secretary to each stockholder entitled to vote at his or her last known address, at least 10 days but not more than 60 days prior to the meeting. Only such business shall be conducted at a special meeting of stockholders as shall be stated in the Company’s notice of the meeting.
SECTION 8. If the entire Board of Directors becomes vacant, any stockholder may call a special meeting in the same manner that the Chairman or the Chief Executive Officer may call such meeting, and Directors for the unexpired term may be elected at said special meeting in the manner provided for their election at annual meetings.
SECTION 9. The Company may, and to the extent required by law, shall, in advance of any meeting of stockholders, appoint one or more inspectors to act at the meeting and make a written report thereof. The Company may designate one or more persons as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate is able to act at a meeting of stockholders, the person presiding at the meeting may, and to the extent required by law, shall, appoint one or more inspectors to act at the meeting. Each inspector, before entering upon the discharge of his or her duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his or her ability. Every vote taken by ballots shall be counted by a duly appointed inspector or inspectors.
SECTION 10. The officer presiding at any meeting of stockholders shall determine the order of business and the procedure at the meeting, including such regulation of the manner of voting and the conduct of discussion as seem to him or her in order. He or she shall have the power to adjourn the meeting to another place, date and time.
SECTION 11. Advance Notice of Director Nominations and Other Business Proposals.
(a)Nominees for director will be eligible for election at an annual meeting of stockholders only if the nominations are submitted in one of the following manners: (i) by or at the direction of the Board of Directors, (ii) by any stockholder of record of the Company at the time of the giving of the notice required in the following paragraph, who is entitled to vote at the meeting and who has complied with the notice procedures set forth in this section or (iii) by any stockholder of record who has complied with the requirements and procedures set forth in Section 12 and whose nominees are included in the Company’s proxy materials with respect to such meeting. Business (other than nominations of candidates for election as director) may be presented for stockholder action at an annual meeting of stockholders only if the proposals are submitted in one of the following manners: (i) pursuant to the Company’s proxy materials with respect to such meeting, (ii) by or at the direction of the Board of Directors or (iii) by any stockholder of record of the Company at the time of the giving of the notice required in the following paragraph, who is entitled to vote at the meeting and who has complied with the notice procedures set forth in this section. For the avoidance of doubt, clauses (ii) and (iii) of the first sentence of this paragraph and clause (iii) of the second sentence of this paragraph shall be the exclusive means for a stockholder to make nominations or propose business (other than business included in the Company’s proxy materials pursuant to Rule 14a-8 under the Exchange Act (as defined below in Section 13)) at an annual meeting of stockholders.
(b)For nominations to be properly brought before an annual meeting by a record stockholder pursuant to clause (ii) of the first sentence of the foregoing paragraph or for business to be properly brought before an annual meeting by a record stockholder pursuant to clause (iii) of the second sentence of the foregoing paragraph, (a) the record stockholder must have given timely notice thereof in writing to the Secretary of the Company, (b) any such business must be a proper matter for stockholder action under Delaware law and (c) the record stockholder and the beneficial owner, if any, on whose behalf any such proposal or nomination is made, must have acted in accordance with the representations set forth in the Solicitation Statement (as defined below in Section 11(c)(iv)) required by these By-laws and must have complied with the other applicable provisions of these By-laws. To be timely, a record stockholder’s notice shall be delivered to, or mailed and received by, the Secretary at the principal
executive offices of the Company not more than 120 days and not less than 90 days prior to the one-year anniversary of the preceding year’s annual meeting of stockholders; provided, however, that, subject to the last sentence of this paragraph, if the meeting is convened more than 30 days prior to or delayed by more than 30 days after the anniversary of the preceding year’s annual meeting, or if no annual meeting was held in the preceding year, notice by the record stockholder to be timely must be so delivered, or mailed and received, not later than the later of (i) the 90th day before such annual meeting or (ii) the 10th day following the day on which Public Announcement (as defined below in Section 13) of the date of such meeting is first made. Notwithstanding anything in the preceding sentence to the contrary, in the event that the number of directors to be elected to the Board of Directors is increased and there has been no Public Announcement naming all of the nominees for director or indicating the increase in the size of the Board of Directors made by the Company at least 10 days before the last day a record stockholder may deliver a notice of nomination in accordance with the preceding sentence, a record stockholder’s notice required by this Section 11 shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be received by the Secretary at the principal executive offices of the Company not later than the 10th day following the day on which such Public Announcement is first made by the Company. In no event shall an adjournment of an annual meeting of stockholders, or postponement of any previously scheduled annual meeting of stockholders for which notice has been given (or with respect to which there has been a Public Announcement of the date of the meeting), commence a new time period (or extend any time period) for the giving of a record stockholder’s notice.
(c) Such record stockholder’s notice shall set forth:
(i)if such notice pertains to the nomination of directors, as to each person whom the record stockholder proposes to nominate for election or reelection as a director (A) all information relating to such person as would be required to be disclosed in solicitations of proxies for the election of such nominees as directors pursuant to Regulation 14A under the Exchange Act, and such person’s written consent to serve as a director if elected and (B) a completed director questionnaire signed by each such nominee (a form of which shall be provided by the Secretary of the Company within 10 days following a request therefor by a record stockholder);
(ii)as to any business that the record stockholder proposes to bring before the meeting, a brief description of such business (including the text of any resolutions proposed for consideration and, in the case of proposed By-law amendment(s), the language of the proposed amendment(s)), the reasons for conducting such business at the meeting and any material interest (including a substantial interest, within the meaning of Item 5 of Schedule 14A under the Exchange Act) in such business of such record stockholder and the beneficial owner, if any, on whose behalf the proposal is made;
(iii)the Background Information, as defined below in Section 13;
(iv)a statement (A) whether or not the record stockholder, any beneficial owner or any other participant (as defined in Item 4 of Schedule 14A under the Exchange Act) will engage in a solicitation within the meaning of Exchange Act Rule 14a-1(l) with respect to the nomination or business proposal and, if so, the name of each participant (as defined in Item 4 of Exchange Act Schedule 14A) in such solicitation and the amount of the cost of the solicitation that has been and will be borne (directly or indirectly) by each participant in such solicitation, (B) whether such person or group, in the case of a proposal of business other than nominations, will deliver a proxy statement and form of proxy (through means satisfying each of the conditions that would be applicable to the Company under either Exchange Act Rule 14a-16(a) [Notice of Internet Availability of Proxy Materials] or Exchange Act Rule 14a-16(n) [Full Set Delivery]) to holders (including beneficial owners pursuant to Exchange Act Rule 14b-1 and Exchange Act Rule 14b-2) of at least the percentage of voting power of all of the shares of capital stock of the Company required under applicable law to carry the business proposal (if applicable), (C) confirming that such person or group, in the case of any nomination (except for a nomination made by an Eligible Stockholder pursuant to Section 12), will solicit the holders of at least 67% of the voting power of the Company’s stock entitled to vote generally in the election of directors in support of director nominees other than the Company’s nominees, and (D) whether any such person or group intends to otherwise solicit proxies from stockholders in support of a proposal or nomination (such statements collectively, a “Solicitation Statement”); and
(v)a representation that immediately after any such person or group has solicited the applicable percentage of holders referenced in the foregoing clause (iv), the record stockholder (or beneficial owner, as applicable) will provide the Company with documents, which may take the form of a statement and documentation from a proxy solicitor, demonstrating that the necessary steps have been taken to deliver a proxy statement and form of proxy to holders of such percentage of the Company’s stock.
(d) At any time before the applicable annual or special meeting of stockholders, the Company may require the following persons to provide the following information to the Company within 5 business days of a request therefor: (1) any proposed nominee must provide such other information as the Company may require to assess the background of such nominee and to determine the independence of such nominee under the Exchange Act and any applicable stock exchange rules; and (2) any proposed nominee and any stockholder (and beneficial owner, as applicable) must provide any information that the Company determines is required to determine whether any one or more persons have complied with this Section 11.
(e) Any stockholder (or beneficial owner) directly or indirectly soliciting proxies from other stockholders (or beneficial owners) in connection with an annual or special meeting of stockholders must use a proxy card color other than white, and the white proxy card shall be used exclusively for solicitations by or on behalf of the Board of Directors.
(f) Notwithstanding the foregoing provisions of this Section 11, Section 6 and Section 12, a stockholder (and beneficial owner, as applicable) shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to matters set forth in this Section 11, Section 6 and Section 12, and a violation of any such requirements shall be deemed a violation of these By-laws.
(g) Only such persons who are nominated in accordance with this Section 11 or Section 12 shall be eligible to serve as directors and only such business shall be conducted at an annual or special meeting of stockholders as shall have been brought before the meeting in accordance with this Section 11 and, if applicable, Section 6. Without limiting any remedy available to the Company, a stockholder may not present nominations for director or business at a meeting of stockholders (and any such nominee shall be disqualified from standing for election or re-election), notwithstanding that proxies have been solicited in respect of such vote may have been received by the Company, if such stockholder, any beneficial owner (as applicable) or any nominee for director (as applicable) acted contrary to any representation, statement, certification or agreement required by this Section 11 (or Section 6 or Section 12, as applicable), otherwise failed to comply with these By-laws (or with any law, rule or regulation identified in these By-laws) or provided false or misleading information to the Company.
(h) The chairman of the meeting shall have the power and the duty to determine whether a nomination or any business proposed to be brought before the meeting has been made in accordance with the procedures set forth in these By-laws. Notwithstanding the foregoing provisions of this Section 11, unless otherwise required by law or otherwise determined by the chairman of the meeting, if none of: (i) the record stockholder who has submitted a notice of a nomination or business proposal under this Section 11 or (ii) a Qualified Representative (as defined below in Section 13) of such record stockholder, appears at the annual or special meeting of stockholders of the Company to present the nomination(s) or other business proposal, such nomination(s) or business proposal shall be disregarded.
SECTION 12.
(a)Proxy Access. Subject to the terms and conditions set forth in these By-laws, in connection with an annual meeting of stockholders, the Company shall include (i) in its proxy statement and form of proxy, in addition to the persons nominated for election by the Board of Directors or any committee thereof, the name of any person nominated for election (the “Stockholder Nominee”) to the Board of Directors by a record stockholder who is, or is acting on behalf of, an Eligible Stockholder (as defined below in Section 12(e)) and (ii) in its proxy statement the Required Information (as defined below in Section 12(c)) relating to any Stockholder Nominee. For the avoidance of doubt, the provisions of this Section 12 shall not apply to a special meeting of stockholders, and the Company shall not be required to include a director nominee of a stockholder or any other person in the Company’s proxy statement or form of proxy for any special meeting of stockholders except to the extent required by Exchange Act Rule 14a-19.
(b)Timeliness of Notice. To nominate a Stockholder Nominee, a record stockholder who is, or is acting on behalf of, an Eligible Stockholder must provide a notice that expressly elects to have the Eligible Stockholder’s Stockholder Nominee included in the Company’s proxy materials pursuant to this Section 12 (the “Notice of Proxy Access Nomination”). To be timely, a Notice of Proxy Access Nomination must be delivered to, or mailed and received by, the Secretary at the principal executive offices of the Company not earlier than the 150th day and no later than the 120th day prior to the one-year anniversary of the date (as stated in the Company’s proxy materials) the definitive proxy statement was first sent to stockholders in connection with the preceding year’s annual meeting of stockholders (the last day on which a Notice of Proxy Access Nomination may be delivered, the “Final Proxy Access Nomination Date”), provided that in the event that the date of such annual meeting is more than 30 days before or more than 60 days after the one-year anniversary date of the prior year’s annual meeting of stockholders, or if no annual meeting was held in the preceding year, the Notice of Proxy Access Nomination must be so delivered, or mailed and received, not later than the later of (i) the 120th day prior to such annual meeting or (ii) the tenth day following the day on which a Public Announcement (as defined below in Section 13) of the annual meeting date is first made by the Company. In no event shall an adjournment of an annual meeting of stockholders, or postponement of any previously scheduled meeting of stockholders for which notice has been given (or with respect to which there has been a Public Announcement of the date of the meeting), commence a new time period (or extend any time period) for the giving of a Notice of Proxy Access Nomination under this Section 12.
(c)Information Included in Proxy Materials. The Eligible Stockholder may provide to the Secretary a written statement for inclusion in the Company’s proxy statement for the applicable annual meeting of stockholders, not to exceed 500 words, in support of the Eligible Stockholder’s Stockholder Nominee (the “Statement”). In order to have a Statement included in the proxy statement, an Eligible Stockholder must submit the Statement to the Secretary at the same time that such Eligible Stockholder’s Notice of Proxy Access Nomination is submitted to the Secretary. Notwithstanding anything to the contrary contained in this Section 12, the Company may omit from its proxy materials any information or Statement (or portion thereof) that it believes would violate any applicable law or regulation. For purposes of this Section 12, the “Required Information” that the Company will include in its proxy statement is (i) the information concerning the Stockholder Nominee and the Eligible Stockholder that the Company determines is required to be disclosed in the Company’s proxy statement by the regulations promulgated under the Exchange Act (as defined below in Section 13); and (ii) if the Eligible Stockholder so elects, a Statement (defined above). Nothing in this Section 12 shall limit the Company’s ability to solicit against and include in its proxy materials its own statements relating to any Stockholder Nominee.
(d)Number of Stockholder Nominees. The maximum number of Stockholder Nominees appearing in the Company’s proxy materials with respect to an annual meeting of stockholders shall not exceed the greater of (i) two or (ii) 20% of the number of directors in office and subject to election by the holders of common stock as of the Final Proxy Access Nomination Date, or if the number of directors calculated in this clause (ii) is not a whole number, the closest whole number below 20% (the number determined pursuant to clause (i) or clause (ii), as applicable, the “Permitted Number”); provided, further, that in the event that one or more vacancies for any reason occurs on the Board of Directors at any time after the Final Proxy Access Nomination Date and before the date of the applicable annual meeting of stockholders and the Board of Directors resolves to reduce the size of the Board of Directors in connection therewith, the Permitted Number shall be calculated based on the number of directors in office as so reduced. The Permitted Number shall be reduced by the number of director candidates for which the Company shall have received one or more notices that a stockholder intends to nominate such director candidates at such applicable annual meeting of stockholders pursuant to clause (ii) of the first sentence of Article III, Section 11(a) of these By-laws. The Permitted Number shall be further reduced by the number of director candidates who were Stockholder Nominees at any of the three annual meetings of stockholders preceding the applicable annual meeting and whose reelection at the upcoming annual meeting of stockholders is being recommended by the Board of Directors. The Permitted Number shall also be reduced by the number of director candidates whose names were submitted for inclusion in the Company’s proxy materials pursuant to this Section 12, but who were thereafter nominated by the Board of Directors. In the event that the number of Stockholder Nominees submitted by Eligible Stockholders pursuant to this Section 12 exceeds the Permitted Number, each Eligible Stockholder will select one Stockholder Nominee for inclusion in the Company’s proxy materials until the Permitted Number is reached, going in order of the amount (largest to smallest) of shares of common stock of the Company each Eligible Stockholder disclosed as owned in its respective Notice of Proxy Access Nomination submitted to the Company. If the Permitted Number is not reached after each Eligible Stockholder has selected one Stockholder Nominee, this selection process will continue as many times as necessary, following the same order each time, until the Permitted Number is reached.
Following such determination, if any Stockholder Nominee who satisfies the eligibility requirements in this Section 12 (i) thereafter withdraws from the election (or his or her nomination is withdrawn by the applicable Eligible Stockholder) or (ii) is thereafter not submitted for director election for any reason (including the failure to comply with this Section 12) other than due to a failure by the Company to include such Stockholder Nominee in the proxy materials in violation of this Section 12, no other nominee or nominees (other than any Stockholder Nominee already determined to be included in the Company’s proxy materials who continues to satisfy the eligibility requirements of this Section 12) shall be included in the Company’s proxy materials or otherwise submitted for director election pursuant to this Section 12.
(e)Group Provisions to Determine Eligible Stockholder. An “Eligible Stockholder” is one or more persons who own and have owned, or are acting on behalf of one or more persons who own and have owned (as defined below in Section 12(f)), for at least three years as of the date the Notice of Proxy Access Nomination is received by the Company, shares representing at least 3% of the shares of common stock outstanding as of the date of such Notice of Proxy Access Nomination (the “Required Shares”), and who continue to own the Required Shares at all times between the date the Notice of Proxy Access Nomination is received by the Company and the date of the applicable annual meeting of stockholders, provided that the aggregate number of persons whose stock ownership is counted for the purposes of satisfying the foregoing ownership requirement, shall not exceed 20. Two or more funds that are (i) under common management and investment control, (ii) under common management and funded primarily by a single employer or (iii) a “group of investment companies,” as such term is defined in Section 12(d)(1)(G)(ii) of the Investment Company Act of 1940 (as amended from time to time the “Investment Company Act”) (such funds together under each of (i), (ii) or (iii) comprising a “Qualifying Fund”) shall be treated as one owner for the purpose of determining the aggregate number of stockholders in this paragraph, and treated as one person for the purpose of determining “ownership” as defined in this Section 12, provided that each fund comprising a Qualifying Fund otherwise meets the requirements set forth in this Section 12. No person (other than a Custodian Holder) may be a member of more than one group constituting an Eligible Stockholder under this Section 12.
(f)Definition of Ownership. For purposes of calculating the Required Shares, “ownership” shall be deemed to consist of and include only the outstanding shares as to which a person possesses both (i) the full voting and investment rights pertaining to the shares and (ii) the full economic interest in (including the opportunity for profit and risk of loss on) such shares; provided that the ownership of shares calculated in accordance with clauses (i) and (ii) shall not include any shares (A) that a person has sold in any transaction that has not been settled or closed, (B) that a person has borrowed or purchased pursuant to an agreement to resell or (C) subject to any option, warrant, forward contract, swap, contract of sale, other derivative or similar agreement entered into by a person, whether any such instrument or agreement is to be settled with shares or with cash based on the notional amount or value of shares, in any such case which instrument or agreement has, or is intended to have, the purpose or effect of (1) reducing in any manner, to any extent or at any time in the future, the person’s full right to vote or direct the voting of any such shares, and/or (2) hedging, offsetting or altering to any degree gain or loss arising from the full economic ownership of such person’s shares. “Ownership” shall include shares held in the name of a nominee or other intermediary so long as the person claiming ownership of such shares retains the right to instruct how the shares are voted with respect to the election of directors and possesses the full economic interest in the shares, provided that this provision shall not alter the obligations of any record stockholder to provide the Notice of Proxy Access Nomination. Ownership of shares shall be deemed to continue during any period in which shares have been loaned if the person claiming ownership may recall such loaned shares on three business days’ notice and during any period in which any voting power has been delegated by means of a proxy, power of attorney or other instrument or arrangement which is revocable at any time without condition. The terms “owned,” “owning” and other variations of the word “own” shall have correlative meanings.
(g) Contents of Notice of Proxy Access Nomination. The Notice of Proxy Access Nomination shall set forth or be submitted with the following information and materials in writing (including, as applicable, with respect to each record stockholder, fund comprising a Qualifying Fund and any other person whose stock ownership is counted for the purposes of qualifying as an Eligible Stockholder but not with respect to a Custodian Holder (as defined below in Section 13)):
(i)with respect to each of the Stockholder Nominee(s) and the Eligible Stockholder, the Background Information (as defined below in Section 13);
(ii)with respect to the Eligible Stockholder, the number of shares that the Eligible Stockholder is deemed to own for the purposes of this Section 12;
(iii)the written consent of each Stockholder Nominee to being named in the Company’s proxy materials as a nominee and to serving as a director if elected;
(iv)a copy of the Schedule 14N that has been, or concurrently is, filed with the Securities and Exchange Commission as required by Rule 14a-18 under the Exchange Act;
(v)with respect to each Stockholder Nominee, all information relating to such Stockholder Nominee as would be required to be disclosed in a solicitation of proxies for the election of such nominee as a director pursuant to Regulation 14A under the Exchange Act; and
(vi)a completed director questionnaire signed by the Stockholder Nominee(s) (a form of which shall be provided by the Secretary of the Company within 10 days following a request therefor by a record stockholder).
In addition, the Notice of Proxy Access Nomination must be submitted with a signed and written agreement of the Eligible Stockholder (including, as applicable, a signed and written agreement with respect to each record stockholder, fund comprising a Qualifying Fund and any other person whose stock ownership is counted for the purposes of qualifying as an Eligible Stockholder but not with respect to a Custodian Holder) setting forth:
(i)a representation that the Eligible Stockholder (A) acquired ownership of the Required Shares in the ordinary course of business and not with the intent to change or influence control of the Company, and does not presently have such intent, (B) intends to maintain qualifying ownership of the Required Shares through the date of the applicable annual meeting of stockholders, (C) has not nominated and will not nominate for election to the Board of Directors at the applicable annual meeting of stockholders any person other than its Stockholder Nominee(s), (D) has not engaged and will not engage in, and has not and will not be a “participant” in another person’s, “solicitation” within the meaning of Rule 14a-1(l) under the Exchange Act in support of the election of any individual as a director at the applicable annual meeting of stockholders other than its Stockholder Nominee(s) or a nominee of the Board of Directors, (E) will not distribute to any person any form of proxy for the applicable annual meeting of stockholders other than the form distributed by the Company, and (F) will provide facts, statements and other information in all communications with the Company and its stockholders that are or will be true and correct in all material respects and do not and will not omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading and otherwise will comply with all applicable laws, rules and regulations in connection with any actions taken pursuant to this Section 12;
(ii)a representation that (A) within five business days after the date that the Notice of Proxy Access Nomination is sent to the Company, the Eligible Stockholder will provide one or more written statements from the record holder of the Required Shares (and from each intermediary through which the Required Shares are or have been held during the requisite three-year holding period) that, as of a date within seven calendar days prior to the date that the Notice of Proxy Access Nomination is delivered to or mailed and received by the Company, the Eligible Stockholder owns, and has owned continuously for the preceding three years, the Required Shares, (B) within five business days after the record date for determining the stockholders entitled to vote at the annual meeting, the Eligible Stockholder will provide one or more written statements from the record holder (and from each intermediary through which the Required Shares are held) verifying the Eligible Stockholder’s continuous ownership of the Required Shares through such record date and (C) the Eligible Stockholder will provide immediate written notice to the Company if the Eligible Stockholder ceases to own any of the Required Shares prior to the date of the applicable annual meeting of stockholders;
(iii)in the case of a nomination by a group of persons that together is such an Eligible Stockholder, the designation by all group members of one group member that is authorized to act on behalf of all members of
the nominating group with respect to the nomination and matters related thereto, including withdrawal of the nomination;
(iv)an undertaking that the Eligible Stockholder agrees to (A) assume all liability stemming from any legal or regulatory violation arising out of the Eligible Stockholder’s communications with the stockholders of the Company or out of the information that the Eligible Stockholder provided to the Company, (B) indemnify and hold harmless the Company and each of its directors, officers and employees individually against any liability, loss or damages in connection with any threatened or pending action, suit or proceeding, whether legal, administrative or investigative, against the Company or any of its directors, officers or employees arising out of any nomination, solicitation or other activity by the Eligible Stockholder in connection with its efforts to elect the Stockholder Nominee pursuant to this Section 12, (C) file with the Securities and Exchange Commission any solicitation or other communication with the Company’s stockholders relating to the meeting at which the Stockholder Nominee will be nominated, regardless of whether any such filing is required under Regulation 14A of the Exchange Act or whether any exemption from filing is available for such solicitation or other communication under Regulation 14A of the Exchange Act, (D) comply with all laws and regulations applicable to any solicitation in connection with the annual meeting and (E) provide the Company prior to the annual meeting of stockholders such additional information as necessary or reasonably requested by the Company. In addition, no later than the Final Proxy Access Nomination Date, a Qualifying Fund whose stock ownership is counted for purposes of qualifying as an Eligible Stockholder must provide to the Secretary documentation satisfactory to the Company that demonstrates that the funds comprising the Qualifying Fund are (i) under common management and investment control, (ii) under common management and funded primarily by a single employer or (iii) a “group of investment companies,” as such term is defined in Section 12(d)(1)(G)(ii) of the Investment Company Act; and
(v)an agreement and waiver by the Eligible Stockholder, in a form reasonably acceptable to the Company, providing that, if any of such Eligible Stockholder’s Stockholder Nominee(s) are elected at the annual meeting to which such Eligible Stockholder’s Notice of Proxy Access Nomination relates, for the following three annual meetings, the Eligible Stockholder will not, and irrevocably waives any right to, nominate any candidates for director election other than a nomination submitted pursuant to, and subject to the terms and conditions of, this Section 12.
(h) Information and Agreements from Stockholder Nominees. At the request of the Company, each Stockholder Nominee must: (i) provide an executed agreement, in a form satisfactory to the Company, that (A) the Stockholder Nominee has read and agrees, if elected, to serve as a member of the Board of Directors, to adhere to the Company’s Corporate Governance Guidelines (including the Director Independence Standards attached as Exhibit A thereto) and Code of Conduct and any other Company policies and guidelines applicable to directors (which will be provided by the Company following a request therefor), (B) the Stockholder Nominee is not and will not become a party to any compensatory, payment or other financial agreement, arrangement or understanding with any person or entity in connection with service or action as Stockholder Nominee or as a director of the Company, in each case that has not been disclosed to the Company, and (C) the Stockholder Nominee is not and will not become a party to any agreement, arrangement or understanding with any person or entity as to how the Stockholder Nominee would vote or act on any issue or question as a director; and (ii) provide within five business days of the Company’s request such additional information as the Company determines may be necessary to permit the Board of Directors to determine (A) if such Stockholder Nominee is independent under the listing standards of each principal U.S. exchange upon which the common stock of the Company is listed, any applicable rules of the Securities and Exchange Commission, the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”), the Office of the Comptroller of the Currency (the “OCC”) and any publicly disclosed standards used by the Board of Directors in determining and disclosing the independence of the Company’s directors, (B) if such Stockholder Nominee has any direct or indirect relationship with the Company other than those relationships that have been deemed categorically immaterial pursuant to the Company’s Corporate Governance Guidelines and (C) if such Stockholder Nominee is not and has not been subject to any event specified in Item 401(f) of Regulation S-K (or successor rule) of the Securities and Exchange Commission. In the event that any information or communications provided by the Eligible Stockholder or the Stockholder Nominee to the Company or its stockholders ceases to be true and correct in any respect or omits a fact necessary to make the statements made, in light of the circumstances under which they were made, not misleading, each Eligible Stockholder or Stockholder Nominee, as the case may be,
shall promptly notify the Secretary of any such inaccuracy or omission in such previously provided information and of the information that is required to make such information or communication true and correct.
(i)Ineligibility of Certain Stockholders to Use Proxy Access. Any Stockholder Nominee who is included in the Company’s proxy materials for a particular annual meeting of stockholders but withdraws from or becomes ineligible or unavailable for election at that annual meeting, will be ineligible to be a Stockholder Nominee pursuant to this Section 12 for the next two annual meetings of stockholders. Any Stockholder Nominee who is included in the Company’s proxy statement for a particular annual meeting of stockholders, but subsequently is determined not to satisfy the eligibility requirements of this Section 12 or any other provision of the Company’s By-laws, Certificate of Incorporation, Corporate Governance Guidelines or other applicable regulation at any time before the applicable annual meeting of stockholders, will not be eligible or qualified for election at the relevant annual meeting of stockholders and no other nominee may be substituted by the Eligible Stockholder that nominated such Stockholder Nominee.
(j)Exclusion of Stockholder Nominees from Proxy Materials. The Company shall not be required to include, pursuant to this Section 12, a Stockholder Nominee in its proxy materials for any meeting of stockholders, or, if the proxy statement already has been filed, to allow the nomination of a Stockholder Nominee, notwithstanding that proxies in respect of such vote may have been received by the Company:
(i)if the Stockholder Nominee or the Eligible Stockholder (or any member of any group of persons that together is such Eligible Stockholder) who has nominated such Stockholder Nominee has engaged in or is currently engaged in, or has been or is a “participant” in another person’s, “solicitation” within the meaning of Rule 14a-1(l) under the Exchange Act in support of the election of any individual as a director at the applicable annual meeting of stockholders other than its Stockholder Nominee(s) or a nominee of the Board of Directors;
(ii)who is not independent under (A) the listing standards of each principal U.S. exchange upon which the common stock of the Company is listed, (B) any applicable rules of the Securities and Exchange Commission, the Federal Reserve Board, the OCC or any other regulatory body with jurisdiction over the Company or (C) any publicly disclosed standards used by the Board of Directors in determining and disclosing independence of the Company’s directors, in each case as determined by the Company;
(iii)who does not meet the audit committee independence requirements under the rules of any stock exchange on which the Company’s securities are traded, is not a “non-employee director” for the purposes of Rule 16b-3 under the Exchange Act (or any successor rule), is not an “outside director” for the purposes of Section 162(m) of the Internal Revenue Code (or any successor provision), is not experienced in matters of risk management for the purposes of Regulation YY of the Federal Reserve Board, is not independent for the purposes of the requirements under the FDIC Improvement Act related to designation as an “outside director”;
(iv)whose election as a member of the Board of Directors would cause the Company to be in violation of these By-laws, the Certificate of Incorporation, the rules and listing standards of the principal U.S. securities exchanges upon which the common stock of the Company is listed, or any applicable state or federal law, rule or regulation; who is or has been, within the past three years, an officer or director of a competitor, as defined in Section 8 of the Clayton Antitrust Act of 1914 (as amended from time to time);
(v)whose election as a member of the Board of Directors would cause the Company to seek, or assist in the seeking of, advance approval or to obtain, or assist in the obtaining of, an interlock waiver pursuant to the rules or regulations of the Federal Reserve Board, the OCC or the Federal Energy Regulatory Commission;
(vi)who is a director, trustee, officer or employee with management functions for any depository institution, depository institution holding company or entity that has been designated as a Systemically Important Financial Institution, each as defined in the Depository Institution Management Interlocks Act;
(vii)who is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses) or has been convicted in such a criminal proceeding within the past 10 years;
(viii)who is subject to an order of the type specified in Rule 506(d) of Regulation D promulgated under the Securities Act of 1933, as amended from time to time;
(ix)if such Stockholder Nominee or the applicable Eligible Stockholder (or any member of any group of persons that together is such Eligible Stockholder) shall have provided information to the Company in connection with such nomination that was untrue in any material respect or omitted to state a material fact necessary in order to make any statement made, in light of the circumstances under which it was made, not misleading, as determined by the Company;
(x)if the Eligible Stockholder (or any member of any group of persons that together is such Eligible Stockholder) or applicable Stockholder Nominee otherwise breaches or fails to comply with its representations or obligations pursuant to these By-laws, including, without limitation, this Section 12 or fails to timely provide to the Company the information contemplated by Section 11(d); or
(xi)if the Eligible Stockholder ceases to be an Eligible Stockholder for any reason, including but not limited to not owning the Required Shares through the date of the applicable annual meeting.
For the purpose of this subsection (j), if any of the conditions set forth in clauses (ii) through (xii) are satisfied, then the applicable Stockholder Nominee shall not be included in the proxy materials and shall not be eligible or qualified for director election and if any of the conditions set forth in clause (i) are satisfied, then no Stockholder Nominees shall be included in the proxy materials and no Stockholder Nominee shall be eligible or qualified for director election.
(k)Conditional Resignations of Stockholder Nominees. Any Stockholder Nominee who is included in the Company’s proxy materials for an annual meeting of stockholders pursuant to this Section 12 shall tender an irrevocable resignation (resigning his or her candidacy for director election and, if applicable at the time of the determination made in the next sentence, resigning from his or her position as a director), in a form satisfactory to the Company, in advance of the annual meeting, provided that such resignation shall expire upon the certification of the voting results of that annual meeting of stockholders. Such resignation shall become effective upon a determination by the Board of Directors or any committee thereof that (i) the information provided pursuant to this Section 12 to the Company by such individual or by the Eligible Stockholder (or any member of any group of persons that together is such Eligible Stockholder) who nominated such individual was untrue in any material respect or omitted to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading or (ii) such individual, or the Eligible Stockholder (or any member of any group of persons that together is such Eligible Stockholder) who nominated such individual, shall have breached or failed to comply with its agreements, representations undertakings and/or obligations pursuant to these By-laws, including, without limitation, this Section 12.
(l)Interpretation; Application; Attendance of Eligible Stockholder at Annual Meeting. The Board of Directors (and any other person or body authorized by the Board of Directors) shall have the power and authority to interpret this Section 12 and to make any and all determinations necessary or advisable to apply this Section 12 to any persons, facts or circumstances, including the power to determine (i) whether a person or group of persons qualifies as an Eligible Stockholder, (ii) whether a Notice of Proxy Access Nomination complies with this Section 12, (iii) whether a person satisfies the qualifications and requirements imposed by this Section 12 to be a Stockholder Nominee and (iv) whether any and all requirements of this Section 12 have been satisfied. Any such interpretation or determination adopted in good faith by the Board of Directors (or any other person or body authorized by the Board of Directors) shall be binding on all persons, including the Company and all record or beneficial owners of stock of the Company. Notwithstanding the foregoing provisions of this Section 12, unless otherwise required by law or otherwise determined by the chairman of the meeting, if none of: (i) the Eligible Stockholder, (ii) a Qualified Representative (as defined below in Section 13) of the Eligible Stockholder or (iii) if the Eligible Stockholder is comprised of a group, no member of such group, appears at the annual meeting of stockholders of the Company to present its Stockholder Nominee(s), such nomination or nominations shall be disregarded and conclusively deemed withdrawn, notwithstanding that proxies in respect of the election of the Stockholder Nominee(s) may have been received by the Company.
(m) Exclusive Method of Proxy Access. Except for a nomination made in accordance with Exchange Act Rule 14a-19, this Section 12 shall be the exclusive method for stockholders (including beneficial owners of stock) to include nominees for director election in the Company’s proxy materials.
SECTION 13. As used in these By-laws, the following terms shall have the meanings set forth below:
(a)“Background Information” means the following information concerning a Disclosing Party: (A) the name and address of each such Disclosing Party (as defined below in Section 13(c)); (B) the class, series, and number of shares of the Company that are owned, directly or indirectly, beneficially and of record by each such Disclosing Party; (C) any option, warrant, convertible security, stock appreciation right, or similar right with an exercise or conversion privilege or a settlement payment or mechanism at a price related to any class or series of shares of the Company or with a value derived in whole or in part from the value of any class or series of shares of the Company, whether or not such instrument or right shall be subject to settlement in the underlying class or series of capital stock of the Company or otherwise (a “Derivative Instrument”) directly or indirectly owned beneficially by each such Disclosing Party, and any other direct or indirect opportunity to profit or share in any profit derived from any increase or decrease in the value of shares of the Company; (D) any proxy, contract, arrangement, understanding, or relationship (including the identities of all parties thereto) pursuant to which any Disclosing Party has a right to vote, directly or indirectly, any shares of any security of the Company; (E) any short interest in any security of the Company held by each such Disclosing Party (for purposes of this paragraph, a person shall be deemed to have a short interest in a security if such person directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has the opportunity to profit or share in any profit derived from any decrease in the value of the subject security); (F) any rights to dividends on the shares of the Company owned beneficially directly or indirectly by each such Disclosing Party that are separated or separable from the underlying shares of the Company; (G) any proportionate interest in shares of the Company or Derivative Instruments held, directly or indirectly, by a general or limited partnership in which any Disclosing Party is a general partner or, directly or indirectly, beneficially owns an interest in a general partner; (H) any performance-related fees (other than an asset-based fee) that each such Disclosing Party is directly or indirectly entitled to based on any increase or decrease in the value of shares of the Company or Derivative Instruments, if any, as of the date of such notice, including without limitation any such interests held by members of each such Disclosing Party’s immediate family sharing the same household; and (I) any other information relating to such Disclosing Party that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for, as applicable, the election of directors in a contested election pursuant to Section 14 of the Exchange Act (which information set forth in this paragraph shall be supplemented by such Disclosing Party (i) not later than 10 days after the record date for determining the stockholders entitled to vote at the meeting to make such information true and correct as of such record date; provided, that if such 10th day after the record date is after the date of the meeting, not later than the day prior to the meeting and (ii) not later than 10 days before the date of the meeting to make such information true and correct as of 5 p.m. Eastern time on the 15th day before the date of the meeting).
(b)“beneficial owner” of shares of capital stock of the Company shall include any person who is a “beneficial owner” of shares within the meaning of Section 13(d) of the Exchange Act.
(c) “Custodian Holder”, with respect to any Eligible Stockholder, means any broker, bank or custodian (or similar nominee) who (i) is acting solely as a nominee on behalf of a beneficial owner and (ii) does not “own” (as defined in Section 12) any of the shares comprising the Required Shares of the Eligible Stockholder.
(d) “Disclosing Party” means:
(i)with respect to the disclosure of Background Information pursuant to Section 6, any record stockholder making a request to call a special meeting, any beneficial owner on whose behalf any such stockholder is making such a request and any affiliate who controls either the foregoing record stockholder or beneficial owner, directly or indirectly, in each case other than (A) a stockholder or beneficial owner, as applicable, who has provided a written request solely in response to a solicitation made pursuant to, and in accordance with, Section 14(a) of the Exchange Act by way of a solicitation statement filed on Exchange Act Schedule 14A or (B) a record stockholder that is a broker, bank or custodian (or similar entity) and is acting solely as a nominee on behalf of a beneficial owner;
(ii)with respect to the disclosure of Background Information pursuant to Section 11, the record stockholder providing a notice under Section 11 (other than a record stockholder that is a broker, bank or custodian (or similar entity) and is acting solely as a nominee on behalf of a beneficial owner), the beneficial owner, if any, on whose behalf a nomination or proposal is made and any affiliate who controls either of the foregoing record stockholder or beneficial owner, directly or indirectly; and
(iii)with respect to the disclosure of Background Information pursuant to Section 12, the Stockholder Nominee(s) and the Eligible Stockholder (including (A) any fund comprising a Qualifying Fund or beneficial owner whose stock ownership is counted for the purposes of qualifying as an Eligible Stockholder but excluding (B) any Custodian Holder).
(e) “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, and the rules and regulations promulgated thereunder.
(f) “person” includes, as applicable, any individual, corporation (including not-for-profit), general or limited partnership, limited liability company, joint venture, estate, association, trust or other entity or organization including a government or political subdivision or an agency or instrumentality thereof.
(g) “Public Announcement” means disclosure in a press release reported by the Dow Jones News Service, Associated Press or a comparable national news service or in a document publicly filed by the Company with the Securities and Exchange Commission pursuant to section 13, 14 or 15(d) of the Exchange Act.
(h) A “Qualified Representative” of a stockholder means a person that is a duly authorized officer, manager or partner of such stockholder or is authorized by a writing (a) executed by such stockholder, (b) delivered (or a reliable reproduction or electronic transmission of the writing is delivered) by such stockholder to the Company prior to the taking of the action taken by such person on behalf of such stockholder and (c) stating that such person is authorized to act for such stockholder with respect to the action to be taken.
ARTICLE IV DIRECTORS
SECTION 1. The affairs, property and business of the Company shall be managed by or under the direction of a Board of Directors, with the exact number of Directors to be determined from time to time by resolution adopted by affirmative vote of a majority of the entire Board of Directors. The terms of Directors shall be as provided in the Certificate of Incorporation as amended from time to time. A nominee in an uncontested election shall be elected to the Board of Directors if the votes cast for such nominee’s election exceed the votes cast against such nominee’s election. For purposes of these By-laws, an “uncontested election” means any meeting of stockholders at which directors are elected and with respect to which either (i) no stockholder has submitted notice of an intent to nominate a candidate for election pursuant to Section 11 or Section 12 of Article III of these By-laws or (ii) if such notice has been submitted, all such nominees have been withdrawn by stockholders on or before the tenth day before the Company first mails its notice of meeting for such meeting to the stockholders. In all director elections other than uncontested elections, directors shall be elected by a plurality of the votes cast, and stockholders shall not be permitted to vote against any nominee for director. If the holders of preferred stock of the Company are entitled to elect one or more directors in accordance with a certificate adopted pursuant to Paragraph B of Article FOURTH of the Certificate of Incorporation, such directors shall be elected in accordance with this Section unless a different vote for election is specified in such certificate. If a nominee in an uncontested election is not elected by a majority vote, then the Director shall offer to resign from his or her position as a Director. Unless the Board decides to reject the offer or to postpone the effective date of the offer, the resignation shall become effective 60 days after the date of the election. In making a determination whether to reject the offer or postpone the effective date, the Board of Directors shall consider all factors it deems relevant to the best interests of the Company. If the Board rejects the resignation or postpones its effective date, it shall issue a public statement that discloses the reason for its decision. Unless the Chairman of the Board is an independent Director, the Board of Directors shall appoint a Lead Director who shall, in addition to the responsibilities set forth in the Corporate Governance Guidelines, preside at all meetings of the Board of Directors at which the Chairman is not present, including executive sessions. The Lead Director shall be an independent Director as determined in accordance with the rules of the New York Stock Exchange. In addition to the powers and authorities expressly conferred upon the Board of Directors by these Bylaws, the Board of Directors
may exercise all such powers and do all such acts and things as may be exercised or done by the Company, but subject, nevertheless, to the provisions of the laws of the State of Delaware, of the Certificate of Incorporation and of these By-laws. For purposes of these By-laws the term “entire Board of Directors” shall mean the total number of Directors as determined by the Board of Directors from time to time whether or not there exist any vacancies in previously authorized directorships.
SECTION 2. Vacancies in the Board of Directors shall be filled as provided in the Certificate of Incorporation as amended from time to time.
SECTION 3. The Board of Directors shall have authority to determine from time to time, the amount of compensation that shall be paid to any of its members, provided, however that no such compensation shall be paid to any Director who is a salaried officer or employee of the Company or any of its subsidiaries. Directors shall be entitled to receive transportation and other expenses of attendance at meetings. Nothing herein contained shall be construed to preclude a Director or member of a committee from serving in any other capacity and receiving compensation therefor.
SECTION 4. The Company shall indemnify, to the fullest extent permissible under the General Corporation Law of the State of Delaware, or the indemnification provisions of any successor statute, any person, and the heirs and personal representatives of such person, against any and all judgments, fines, amounts paid in settlement and costs and expenses, including attorneys’ fees, actually and reasonably incurred by or imposed upon such person in connection with, or resulting from any claim, action, suit or proceeding (civil, criminal, administrative or investigative) in which such person is a party or is threatened to be made a party by reason of such person being or having been a director, officer or employee of the Company, or of another corporation, joint venture, trust or other organization in which such person serves as a director, officer or employee at the request of the Company, or by reason of such person being or having been an administrator or a member of any board or committee of the Company or of any such other organization, including, but not limited to, any administrator, board or committee related to any employee benefit plan.
The Company shall advance expenses incurred in defending a civil or criminal action, suit or proceeding to any such director, officer or employee upon receipt of an undertaking by or on behalf of the director, officer or employee to repay such amount, if it shall ultimately be determined that such person is not entitled to indemnification by the Company.
The foregoing right of indemnification and advancement of expenses shall in no way be exclusive of any other rights of indemnification to which any such person may be entitled, under any by-law, agreement, vote of stockholders or disinterested directors or otherwise, and shall inure to the benefit of the heirs and personal representatives of such person.
SECTION 5. Each Director and officer and each member of any committee designated by the Board of Directors shall, in the performance of his or her duties, be fully protected in relying in good faith upon the books of account or other records of the Company or of any of its subsidiaries, or upon information, opinions, reports or statements made to the Company or any of its subsidiaries by any officer or employee of the Company or of a subsidiary or by any committee designated by the Board of Directors or by any other person as to matters such Director, officer or committee member reasonably believes are within such other person’s professional or expert competence and who has been selected with reasonable care by or on behalf of the Company.
ARTICLE V MEETINGS OF THE DIRECTORS
SECTION 1. The Board of Directors shall meet as soon as convenient after the annual meeting of stockholders in the City of New York, State of New York, or at such other place as may be designated by the Board of Directors, for the purpose of organization and the transaction of any other business which may properly come before the meeting.
SECTION 2. Regular meetings of the Directors may be held without notice at such time and place as may be determined from time to time by resolution of the Board of Directors or as determined by the Secretary upon reasonable notice to each Director.
SECTION 3. A majority of the total number of the entire Board of Directors shall constitute a quorum except when the Board of Directors consists of one Director, then one Director shall constitute a quorum for the transaction of business, but the Directors present, though fewer than a quorum, may adjourn the meeting to another day. The vote of the majority of the Directors present at a meeting at which a quorum is present shall be the act of the Board of Directors.
SECTION 4. Special meetings of the Board may be called by the Board of Directors, or the Chairman, on one day’s notice, or other reasonable notice, to each Director, either personally, by mail or by electronic transmission, and may be held at such time and place as the Board of Directors, or the officer calling said meeting may determine. Special meetings may be called in like manner on the request in writing of three Directors. Special meetings of the full Board and executive sessions of the Board may be called in like manner by the Lead Director.
SECTION 5. In the absence of both the Secretary and an Assistant Secretary, the Board of Directors shall appoint a secretary to record all votes and the minutes of its proceedings.
ARTICLE VI COMMITTEES
SECTION 1. The Board of Directors may designate committees of the Board and may invest such committees with all powers of the Board of Directors, except as otherwise provided in the General Corporation Law of the State of Delaware, subject to such conditions as the Board of Directors may prescribe, and all committees so appointed shall keep regular minutes of their transactions and shall cause them to be recorded in books kept for that purpose in the office of the Company and shall report the same to the Board of Directors.
ARTICLE VII EXECUTIVE COMMITTEE
SECTION 1. The Executive Committee shall be composed of the Chairman and such additional Directors not less than three, appointed by the Board, who shall serve until the next annual organization meeting of the Board and until their successors are appointed. A majority of the members of the Executive Committee shall constitute a quorum. The vote of the majority of members of the Executive Committee present at a meeting at which a quorum is present shall be the act of the Executive Committee. Any vacancy on the Executive Committee shall be filled by the Board of Directors.
SECTION 2. The Executive Committee may exercise all powers of the Board of Directors between the meetings of the Board except as otherwise provided in the General Corporation Law of the State of Delaware and for this purpose references in these By-laws to the Board of Directors shall be deemed to include references to the Executive Committee.
SECTION 3. Meetings of the Executive Committee may be called at any time upon reasonable notice, either personally, by mail or by electronic transmission, by the Chairman, the Chairman of the Executive Committee, or by any two members of the Executive Committee.
SECTION 4. In the absence of both the Secretary and an Assistant Secretary, the Executive Committee shall appoint a secretary who shall keep regular minutes of the actions of the Committee and report the same to the Board of Directors.
SECTION 5. The Board of Directors may designate from the members of the Executive Committee a Chairman of the Executive Committee. If the Board of Directors should not make such designation, the Executive Committee may designate a Chairman of the Executive Committee.
ARTICLE VIII OFFICERS OF THE COMPANY
SECTION 1. The officers of the Company shall consist of a Chief Executive Officer and may include a Chairman, a President or Co-Presidents, a Chief Operating Officer, one or more Vice Chairmen, one or more Vice Presidents, a Secretary and a Treasurer. There also may be such other officers and assistant officers as, from time to time, may be elected or appointed by, or pursuant to the direction of, the Board of Directors.
ARTICLE IX OFFICERS – HOW CHOSEN
SECTION 1. The Directors shall appoint a Chief Executive Officer. They may also appoint a Chairman, a President or Co-Presidents, a Chief Operating Officer, one or more Vice Chairmen, one or more Vice Presidents, a Secretary and a Treasurer to hold office for one year or until others are appointed and qualify in their stead or until their earlier death, resignation or removal.
SECTION 2. The Directors may also appoint such other officers and assistant officers as from time to time they may determine, and who shall hold office at the pleasure of the Board. In addition, the Directors may delegate to officers of the Company, as designated by the Chief Executive Officer, the authority to appoint and dismiss assistant officers and deputy officers within the respective officer’s area of supervision.
ARTICLE X CHAIRMAN
SECTION 1. The Directors shall elect a Chairman annually from among their own number. The Chairman shall preside at meetings of the Board of Directors. The Chairman shall also have such powers and duties as may from time to time be assigned by the Board of Directors.
ARTICLE XI CHIEF EXECUTIVE OFFICER
SECTION 1. The Chief Executive Officer shall have the general powers and duties of supervision, management and direction over the business and policies of the Company.
SECTION 2. The Chief Executive Officer shall see that all orders and resolutions of the Board of Directors and any committee thereof are carried into effect, and shall submit reports of the current operations of the Company to the Board of Directors at regular meetings of the Board, and annual reports to the stockholders.
ARTICLE XII PRESIDENT
SECTION 1. In the absence of the Chief Executive Officer, the President or either Co-President shall exercise the powers and duties of the Chief Executive Officer. The President or either Co-President shall have general executive powers as well as the specific powers conferred by these By-laws. The President or either Co-President shall also have such powers and duties as may from time to time be assigned by the Board of Directors or the Chief Executive Officer.
ARTICLE XIII CHIEF OPERATING OFFICER
SECTION 1. In the absence of the Chief Executive Officer and the President or both Co-Presidents, the Chief Operating Officer shall exercise the powers and duties of the Chief Executive Officer. The
Chief Operating Officer shall have general executive powers as well as the specific powers conferred by these Bylaws. The Chief Operating Officer shall also have such powers and duties as may from time to time be assigned by the Board of Directors or the Chief Executive Officer.
ARTICLE XIV VICE CHAIRMEN
SECTION 1. In the absence of the Chief Executive Officer, the President or both Co-Presidents and the Chief Operating Officer, and in the order of their appointment to the office, the Vice Chairmen shall exercise the powers and duties of the Chief Executive Officer. The Vice Chairmen shall have general executive powers as well as the specific powers conferred by these By-laws. Each of them shall also have such powers and duties as may from time to time be assigned by the Board of Directors or the Chief Executive Officer.
ARTICLE XV VICE PRESIDENTS
SECTION 1. Each Vice President shall have such powers and perform such duties as may be assigned to such officer by the Board of Directors or, subject to Section 2 of Article XVIII, by the Chief Executive Officer. The Board of Directors may add to the title of any Vice President such distinguishing designation as may be deemed desirable, which may reflect seniority, duties or responsibilities of such Vice President. The Chief Financial Officer, Treasurer, Controller and General Counsel shall have the powers and duties of a Vice President whether or not given that designation.
ARTICLE XVI SECRETARY
SECTION 1. The Secretary shall attend all sessions of the Board of Directors and act as clerk thereof and record all votes and the minutes of all proceedings in a book to be kept for that purpose, and shall perform like duties for the committees of the Board of Directors when required.
SECTION 2. The Secretary shall see that proper notice is given of all meetings of the stockholders of the Company and of the Board of Directors. In the Secretary’s absence, or in the case of his or her failure or inability to act, an Assistant Secretary or a secretary pro-tempore shall perform his or her duties and such other duties as may be prescribed by the Board of Directors.
SECTION 3. The Secretary shall keep account of certificates of stock, uncertificated shares or other receipts and securities representing an interest in or to the capital of the Company, transferred and registered in such form and manner and under such regulations as the Board of Directors may prescribe.
SECTION 4. The Secretary shall keep in safe custody the contracts, books and such corporate records as are not otherwise provided for, and the seal of the Company. The Secretary shall affix the seal to any instrument requiring the same and the seal, when so affixed shall be attested by the signature of the Secretary, an Assistant Secretary, Treasurer or an Assistant Treasurer.
ARTICLE XVII TREASURER
SECTION 1. The Treasurer shall make such disbursements of the funds of the Company as are authorized and shall render from time to time an account of all such transactions and of the financial condition of the Company. The Treasurer shall also perform such other duties as the Board of Directors may from time to time prescribe.
ARTICLE XVIII DUTIES OF OFFICERS
SECTION 1. In addition to the duties specifically enumerated in the By-laws, all officers and assistant officers of the Company shall perform such other duties as may be assigned to them from time to time by the Board of Directors or by their superior officers.
SECTION 2. The Board of Directors may change the powers or duties of any officer or assistant officer, or delegate the same to any other officer, assistant officer or person.
SECTION 3. Every officer and assistant officer of the Company shall from time to time report to the Board of Directors, or to his or her superior officers all matters within his or her knowledge which the interests of the Company may require to be brought to their notice.
SECTION 4. Unless otherwise directed by the Board of Directors, the Chairman, the Chief Executive Officer, the President or either Co-President, the Chief Operating Officer, any Vice Chairman, any Vice President or the Secretary of the Company shall have power to vote and otherwise act on behalf of the Company, in person or by proxy, at any meeting of stockholders of or with respect to any action of stockholders of any other corporation in which the Company may hold securities and otherwise to exercise any and all rights and powers which the Company may possess by reason of its ownership of securities in such other corporation.
ARTICLE XIX CERTIFICATES OF STOCK, SECURITIES AND NOTES
SECTION 1. The shares of the Company shall be represented by a certificate or shall be uncertificated and shall be entered in the books of the Company and registered as they are issued. Certificates of stock, or other receipts and securities representing an interest in the capital of the Company, shall bear the signature of the Chairman, the President or either Co-President, or any Vice Chairman or any Vice President and bear the countersignature of the Secretary or any Assistant Secretary or the Treasurer or any Assistant Treasurer.
The Board of Directors may appoint one or more transfer agents and registrars, and may require all stock certificates, certificates representing any rights or options, and any written notices or statements relative to uncertificated stock to be signed by such transfer agents acting on behalf of the Company and by such registrars.
Within a reasonable time after the issuance or transfer of uncertificated stock, the Company shall send to the registered owner thereof a written notice containing the information required to be set forth or stated on certificates pursuant to the Delaware General Corporation Law or a statement that the Company will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights.
SECTION 2. Nothing in this Article XIX shall be construed to limit the right of the Company, by resolution of the Board of Directors, to authorize, under such conditions as the Board may determine, the facsimile signature by any properly authorized officer of any instrument or document that the Board of Directors may determine.
SECTION 3. In case any officer, transfer agent or registrar who shall have signed or whose facsimile signature shall have been used on any certificates of stock, notes or securities shall cease to be such officer, transfer agent or registrar of the Company, whether because of death, resignation or otherwise, before the same shall have been issued by the Company, such certificates of stock, notes and securities nevertheless may be issued and delivered as though the person or persons who signed the same or whose facsimile signature or signatures shall have been used thereon had not ceased to be such officer, transfer agent or registrar of the Company.
SECTION 4. Upon surrender to the Company or the transfer agent of the Company of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignation or authority to transfer, it shall be the duty of the Company to issue a new certificate or evidence of the issuance of uncertificated shares to the person entitled thereto, cancel the old certificate and record the transaction upon the Company’s books. Upon the receipt of proper transfer instructions from the registered owner of uncertificated shares, such uncertificated shares
shall be cancelled, issuance of new equivalent uncertificated shares or certificated shares shall be made to the person entitled thereto and the transaction shall be recorded upon the books of the Company.
SECTION 5. The Company shall be entitled to treat the holder of record of any share or shares of stock as the holder in fact thereof, and accordingly shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, save as expressly provided by the laws of the State of Delaware.
SECTION 6. In the case of a loss or the destruction of a certificate of stock, a new certificate of stock or uncertificated shares may be issued in its place upon satisfactory proof of such loss or destruction and the giving of a bond of indemnity, unless waived, approved by the Board of Directors.
ARTICLE XX NEGOTIABLE INSTRUMENTS AND CONTRACTS
SECTION 1. Any of the following officers who have been appointed by the Board of Directors to wit, the Chairman, the Chief Executive Officer, the President or either Co-President, the Chief Operating Officer, the Vice Chairmen, the Vice Presidents, the Secretary, the Treasurer or any other person when such other person is authorized by the Board of Directors shall have the authority to sign and execute on behalf of the Company as maker, drawer, acceptor, guarantor, endorser, assignor or otherwise, all notes, collateral trust notes, debentures, drafts, bills of exchange, acceptances, securities and commercial paper of all kinds.
SECTION 2. The Chairman, the Chief Executive Officer, the President or either Co-President, the Chief Operating Officer, any Vice Chairman, any Vice President, the Secretary, the Treasurer or any other person, when such officer or other person has been appointed by the Board of Directors shall have authority, on behalf of and for the account of the Company, (a) to borrow money against duly executed obligations of the Company; (b) to sell, discount or otherwise dispose of notes, collateral trust notes, debentures, drafts, bills of exchange, acceptances, securities, obligations of the Company and commercial paper of all kinds; (c) to sign orders for the transfer of money to affiliated or subsidiary companies, and (d) to execute contracts, powers of attorney or other documents to which the Company is a party.
SECTION 3. The Board of Directors may either in the absence of any of said officers or persons, or for any other reason, appoint some other officer or some other person to exercise the powers and discharge the duties of any of said officers or persons under this Article, and the officer or person so appointed shall have all the power and authority hereby conferred upon the officer or person for whom he or she may be appointed to act.
ARTICLE XXI FISCAL YEAR
SECTION 1. The fiscal year of the Company shall begin the first day of January and terminate on the thirty-first day of December in each year.
ARTICLE XXII NOTICE
SECTION 1. Whenever under the provisions of the laws of the State of Delaware or these By-laws notice is required to be given to any Director, member of a committee, officer or stockholder, it shall not be construed to mean personal notice, but such notice may be given by electronic transmission or in writing by depositing the same in the post office or letter box in a post paid, sealed wrapper, addressed to such Director, member of a committee, officer or stockholder at his or her address as the same appears in the books of the Company; and the time when the same shall be mailed shall be deemed to be the time of the giving of such notice.
ARTICLE XXIII WAIVER OF NOTICE
SECTION 1. A written waiver of any notice, signed by a Director, member of a committee, officer or stockholder, or waiver by electronic transmission by such person, whether given before or after the time of the event for which notice is to be given, shall be deemed equivalent to the notice required to be given to such person. Neither the business nor the purpose of any meeting need be specified in such waiver. Attendance at any meeting shall constitute waiver of notice except attendance for the sole purpose of objecting to the timeliness of notice.
ARTICLE XXIV AMENDMENT OF BY-LAWS
SECTION 1. The Board of Directors, at any meeting, may alter or amend these By-laws, and any alteration or amendment so made may be repealed by the Board of Directors or by the stockholders at any meeting duly called. Any alteration, amendment or repeal of these By-laws by the Board of Directors shall require the affirmative vote of at least sixty-six and two-thirds percent (66 2/3%) of the entire Board of Directors.
21
Document
| Employment Termination Notice and Nonsolicitation Policy for<br><br>U.S. Employees (“Garden Leave”) |
|---|
Citi1 operates critically important businesses, operations and functions largely dependent on the skill sets of senior executives and officers. To minimize the disruption to those businesses, operations and functions when senior executives and officers resign, Citi requires them to give meaningful advance notice of their resignations. Therefore, the policy below sets forth Citi’s expectations regarding covered employees’ termination notice and post- employment obligations. It applies to Citi employees in accordance with local law.2
This Policy supersedes any prior policies or practices regarding employment termination notice that may have applied to you during your Citi employment.
Policy Overview
Covered Employees (as defined below) must provide advance notice of either 30, 50, 75 or 180 days, as designated below (“Early Termination Notice Period”), of the resignation of their employment. In return, Citi will provide Covered Employees with reciprocal notice of the involuntary termination of their employment for reasons other than for Cause (as defined below). This notice runs concurrently with any other notice period an employee may be eligible to receive under any Citi policy, plan or under applicable law.
In addition, during their employment, inclusive of the Early Termination Notice Period, and for a one-year period following the termination of their employment for any reason, Covered Employees must in no way solicit or facilitate the solicitation of Citi’s clients or its employees.
Policy Detail
Covered Employees
U.S. Employees in the positions noted below (“Covered Positions”) are covered by this Policy (“Covered Employee”):
Position-Based Coverage
| Position | Detail | Required Notice |
|---|---|---|
| Executive Management Team | All officers reporting directly to CEO | 180 Calendar Days |
| Business/Function Heads | Individuals identified by the responsible SHRO as either a Business or Function Head | 75 Calendar Days |
| Direct Reports to individuals reporting to CEO (who do not fall into any of the categories above), Business/Function | Individuals, excluding administrative, who report to individuals reporting directly to the CEO or a covered Business/Function Head | 50 Calendar Days |
1 As used herein, Citi refers to Citigroup Inc., its subsidiaries and their affiliates.
2 This Policy is not intended to shorten any longer notice period that you or Citi may be required to give to each other pursuant to contract or applicable local law, rule or regulation (“Independent Legal Obligation”) nor is it intended to limit or reduce any other obligation which you or Citi may owe to each other pursuant to an Independent Legal Obligation i.e., to the extent a conflict exists between this Policy and an Independent Legal Obligation, this Policy is intended to potentially supplement but not to diminish, any such obligation. If, as a consequence, any component of this Policy is either unenforceable or inapplicable for whatever reason, then, in such instance, this Policy shall not apply in its entirety.
1
Updates to coverage effective September 1, 2023
Business-Based Coverage by Corporate Title
| Business | Managing Director<br>(75 Days) | Director <br>(50 Days) | Senior Vice President<br>(30 days) | Vice President <br>(30 days) |
|---|---|---|---|---|
| Global Functions (excluding Global Risk Management) | X | |||
| Global Risk Management | X | X | X | X |
| Enterprise Infrastructure Operations and Technology | X | X | ||
| Legacy Franchise | X | |||
| U.S. Personal Banking & Wealth Management including PBWM O&T | ||||
| Personal Banking | X | |||
| Wealth Management* | X | x | ||
| Institutional Clients Group | ||||
| ICG (excluding Operations and Technology) | X | X | X | x |
| ICG Operations and ICG Technology | X | X |
*Wealth Management employees who hold the title of Senior Wealth Advisor or equivalent are not subject to Garden Leave.
In its sole discretion, Citi may identify other jobs as a Covered Position, or change the designation of a Covered Position, based on business needs. Jobs which are not defined as a Covered Position herein but are later designated as a Covered Position will be subject to an Early Termination Notice Period based on their corporate title (30 days for Vice Presidents or Senior Vice Presidents, 50 days for Directors, 75 days for Managing Directors, or 180 days for Executive Management Team). Approval to designate or remove a job as a Covered Position must be obtained from the Business Function Head and Senior Human Resources Officer.
Where an employee may be considered a covered person according to multiple criteria based on their title, position and/or business, the longest notice period will apply to such employee. Covered Employees who are assigned outside the U.S. and designated as “Expatriates” on Citi’s books and records shall continue to be Covered Employees during such assignment for all purposes of this Policy.
If Employee Decides to Leave
If a Covered Employee resigns, or otherwise terminates their employment relationship with Citi, they must provide their manager with prior written or verbal notice of their termination date in compliance with this Policy. Verbal notices must be documented by the Manager or Human Resources representative and include the date notice was provided.
Citi may, in its sole discretion, waive all or any part of a Covered Employee’s applicable notice requirement and consider their resignation effective on any such earlier date as determined by it.
Citi may, in its sole discretion, remove a Covered Employee from any assigned duties; assign them to other duties; or require they refrain from performing any job duties or reporting to work, during all or any part of the applicable Early Termination Notice Period.
During the applicable Early Termination Notice Period, or any lesser period as determined by Citi, the Covered Employee will continue to be paid their then current base salary and remain benefits-eligible.
If Citi Asks Employee to Leave
If Citi asks a Covered Employee to leave, it will not terminate their employment, except for Cause, without giving prior notice consistent with this Policy; provided, however, that Citi may, in its sole discretion, elect to provide a Covered Employee with pay in lieu of notice for all or part of the applicable Early Termination Notice Period.
For purposes of this Policy, Citi shall have “Cause” to terminate employment if:
2
Updates to coverage effective September 1, 2023
(i)the employee engages in excessive risk taking in contravention of standards established or revised by the business head, Risk Management and/or senior management, or the employee fails to comply with any balance sheet or working or regulatory capital guidance provided by the business head or function head;
(ii)the employee is subject to an action taken by a regulatory body or a self-regulatory organization (“SRO”) as a result of any act or omission which substantially impairs the employee from performing their duties;
(iii)the employee engages in misconduct or gross misconduct in connection with their employment including a breach of Citi’s compliance and control policies;
(iv)the employee breaches Citi’s non-compliance-related policies or rules including with respect to expense management and human resources;
(v)the employee is dishonest in connection with any aspect of their employment and responsibilities;
(vi)the employee breaches their fiduciary duty of loyalty to Citi;
(vii)the employee violates a federal or state securities or banking law, rule or regulation or the employee violates the constitution, by-laws, rules or regulations of a regulatory authority or SRO;
(viii)the employee fails to remain licensed to perform their duties;
(ix)the employee fails to devote all professional time to their assigned duties and to the business of Citi (except as may be expressly permitted or authorized under Citigroup’s Outside Directorships and Business Interests policy or any policy regarding outside activities applicable to the employee’s business or function);
(x)the employee is convicted of a felony or a crime of breach of trust, money laundering or dishonesty or the employee participates in a pre-trial diversion program after being charged or indicted for a felony or such crime;
(xi)the employee fails to perform assigned duties or is deemed deficient in the performance of such duties;
(xii)the employee made a factual representation or omission in the furtherance of hiring or retention which proves to have been incorrect in any material respect when made;
(xiii)the employee’s actions subject Citi, by virtue of their affiliation with Citi, to negative or adverse publicity; or
(xiv)any other conduct that Citi deems to be misconduct.
This Policy does not alter the employment “at-will” relationship between the Covered Employee and Citi. Both the Covered Employee and Citi retain the right to terminate the employment relationship at any time (subject to the notice periods described herein) for any reason not otherwise prohibited by law.
If Employee Transfers to Non-Covered Job
An employee will be designated as a Covered Employee for so long as they hold a Covered Position. If a Covered Employee’s job is no longer designated a Covered Position, or a Covered Employee transfers into a job that is not a Covered Position, the employee and Citi will be released from any obligations under this Policy 75 days following the effective date of the transfer or change in designation.
However, all other termination-related employment policies, including any non-solicitation obligation, detailed in the applicable Employee Handbook or a Covered Employee’s offer letter or employment agreement will continue to apply.
Nonsolicitation Obligations
During their employment (inclusive of the applicable Early Termination Notice Period) and for the one-year following termination of employment from Citi for any reason, Covered Employees may not, to the extent permitted by law (1) directly or indirectly solicit any Citi employee to leave the employment of Citi for the purpose of employment outside of Citi, regardless of whether the solicitation for employment originates from the Citi employee, or (2) directly or indirectly, induce or attempt to induce or otherwise counsel, advise, encourage or solicit, including through the use of social media, any client of Citi whom they serviced or with whom they had substantial contact during their employment to terminate its relationship with Citi or to transfer assets away from or otherwise reduce its business with Citi. This obligation is in addition to any other post-employment restrictions that a Covered Employee may owe to Citi.
Consequences of Breach
3
Updates to coverage effective September 1, 2023
If a Covered Employee fails to give the Early Termination Notice required under this Policy and/or violates their nonsolicitation obligations during the Early Termination Notice Period or the one-year period thereafter, Citi may seek an order or injunction from a court or arbitration panel to stop the violation, shall be entitled to recover the current cash and deferred portion of any Discretionary Incentive and Retention Awards that would not have been payable if notice had been timely provided in accordance with this Policy as in effect at the time of such failure, and may seek other permissible remedies including damages it actually suffered as a result of the breach or breaches, such as additional compensation paid to replace or retain wrongfully solicited employees.
Notice Obligations and Employee Awards
Covered Employees are not eligible for Discretionary Incentive and Retention Awards once they give notice under this Policy, even if they worked all or a portion of the year for which the Award would have otherwise been granted.
4
Updates to coverage effective September 1, 2023
Document
Exhibit 22
Subsidiary Issuers of Guaranteed Securities
The subsidiaries of Citigroup Inc. listed in the below table have issued (and, in the case of Citigroup Global Markets Holdings Inc., from time to time may issue) the securities listed next to such subsidiary. Citigroup Inc. has fully and unconditionally guaranteed (or effectively provided for the full and unconditional guarantee of) all such securities.
| Subsidiary Issuer | Guaranteed Securities |
|---|---|
| Citigroup Global Markets Holdings Inc., a wholly-owned subsidiary | Senior Debt Securities issued under the Senior Debt Indenture dated as of March 8, 2016, between Citigroup Global Markets Holdings Inc., Citigroup Inc. and The Bank of New York Mellon, as trustee |
| Citigroup Capital III, a wholly-owned finance subsidiary | 7 5/8% Trust Preferred Securities |
| Citigroup Capital XIII, a wholly-owned finance subsidiary | 7.875% Fixed Rate / Floating Rate Trust Preferred Securities |
Document
Exhibit 31.01
CERTIFICATION
I, Jane Fraser, certify that:
1.I have reviewed this Quarterly Report on Form 10-Q of Citigroup Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: November 3, 2023 |
|---|
| /s/ Jane Fraser |
| Jane Fraser |
| Chief Executive Officer |
Document
Exhibit 31.02
CERTIFICATION
I, Mark A. L. Mason, certify that:
1.I have reviewed this Quarterly Report on Form 10-Q of Citigroup Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: November 3, 2023 |
|---|
| /s/ Mark A. L. Mason |
| Mark A. L. Mason |
| Chief Financial Officer |
Document
Exhibit 32.01
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of Citigroup Inc. (the “Company”) for the quarter ended September 30, 2023 (the “Report”), Jane Fraser, as Chief Executive Officer of the Company, and Mark A. L. Mason, as Chief Financial Officer of the Company, each hereby certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| /s/ Jane Fraser | ||
|---|---|---|
| Jane Fraser | ||
| Chief Executive Officer | ||
| November 3, 2023 | /s/ Mark A. L. Mason | |
| --- | ||
| Mark A. L. Mason | ||
| Chief Financial Officer | ||
| November 3, 2023 |
This certification accompanies each Report pursuant to § 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of § 18 of the Securities Exchange Act of 1934, as amended.
A signed original of this written statement required by § 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
c-20230930_d2
| Exhibit 99.01 | |||
|---|---|---|---|
| Citigroup Inc. securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934: | |||
| Title of each class | Ticker Symbol(s) | Title for iXBRL | Name of each exchange on which registered |
| Common Stock, par value $.01 per share | C | Common Stock, par value $.01 per share | New York Stock Exchange |
| Depositary Shares, each representing 1/1,000th interest in a share of 7.125% Fixed/Floating Rate Noncumulative Preferred Stock, Series J | C Pr J | Dep Shs, represent 1/1,000th interest in a share of 7.125% Fix/Float Rate Noncum Pref Stk, Ser J | New York Stock Exchange |
| Depositary Shares, each representing 1/1,000th interest in a share of 6.875% Fixed/Floating Rate Noncumulative Preferred Stock, Series K | C Pr K | Dep Shs, represent 1/1,000th interest in a share of 6.875% Fix/Float Rate Noncum Pref Stk, Ser K | New York Stock Exchange |
| 7.625% Trust Preferred Securities of Citigroup Capital III (and registrant’s guaranty with respect thereto) | C/36Y | 7.625% TRUPs of Cap III (and registrant’s guaranty) | New York Stock Exchange |
| 7.875% Fixed Rate / Floating Rate Trust Preferred Securities (TruPS®) of Citigroup Capital XIII (and registrant’s guaranty with respect thereto) | C N | 7.875% FXD / FRN TruPS of Cap XIII (and registrant’s guaranty) | New York Stock Exchange |
| Medium-Term Senior Notes, Series N, Callable Step-Up Coupon Notes due March 31, 2036 of CGMHI (and registrant’s guaranty with respect thereto) | C/36A | MTN, Series N, Callable Step-Up Coupon Notes due Mar 2036 of CGMHI (and registrant’s guaranty) | New York Stock Exchange |
| Medium-Term Senior Notes, Series N, Callable Step-Up Coupon Notes due February 26, 2036 of CGMHI (and registrant’s guaranty with respect thereto) | C/36 | MTN, Series N, Callable Step-Up Coupon Notes due Feb 2036 of CGMHI (and registrant’s guaranty) | New York Stock Exchange |
| Medium-Term Senior Notes, Series N, Callable Fixed Rate Notes Due December 18, 2035 of CGMHI (and registrant’s guaranty with respect thereto) | C/35 | MTN, Series N, Callable Fixed Rate Notes Due Dec 2035 of CGMHI (and registrant’s guaranty) | New York Stock Exchange |
| Medium-Term Senior Notes, Series N, Callable Fixed Rate Notes Due April 26, 2028 of CGMHI (and registrant’s guaranty with respect thereto) | C/28 | MTN, Series N, Callable Fixed Rate Notes Due Apr 2028 of CGMHI (and registrant’s guaranty) | New York Stock Exchange |
| Medium-Term Senior Notes, Series N, Floating Rate Notes Due September 17, 2026 of CGMHI (and registrant’s guaranty with respect thereto) | C/26 | MTN, Series N, Floating Rate Notes Due Sept 2026 of CGMHI (and registrant’s guaranty) | New York Stock Exchange |
| --- | --- | --- | --- |
| Medium-Term Senior Notes, Series N, Floating Rate Notes Due September 15, 2028 of CGMHI (and registrant’s guaranty with respect thereto) | C/28A | MTN, Series N, Floating Rate Notes Due Sept 2028 of CGMHI (and registrant’s guaranty) | New York Stock Exchange |
| Medium-Term Senior Notes, Series N, Floating Rate Notes Due October 6, 2028 of CGMHI (and registrant’s guaranty with respect thereto) | C/28B | MTN, Series N, Floating Rate Notes Due Oct 2028 of CGMHI (and registrant’s guaranty) | New York Stock Exchange |
| Medium-Term Senior Notes, Series N, Floating Rate Notes Due March 21, 2029 of CGMHI (and registrant’s guaranty with respect thereto) | C/29A | MTN, Series N, Floating Rate Notes Due Mar 2029 of CGMHI (and registrant’s guaranty) | New York Stock Exchange |