<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
THE STUDENT LOAN CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 16-1427135
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
750 WASHINGTON BLVD. 06901
STAMFORD, CONNECTICUT (Zip Code)
(Address of principal executive offices)
(203) 975-6292
(Registrant's telephone number, including area code)
------------------
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 X No
On May 5, 2000, there were 20,000,000 shares of The Student Loan
Corporation's Common Stock outstanding.
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Form 10-Q
Part I Financial Information
<TABLE>
<CAPTION>
<S> <C>
Page
----
Item 1 - Financial Statements
Statements of Income (Unaudited) for the Three Month Periods
Ended March 31, 2000 and 1999 ......................................... 3
Balance Sheets as of March 31, 2000 (Unaudited) and December 31, 1999 4
Statements of Cash Flows (Unaudited) for the Three Month Periods Ended
March 31, 2000 and 1999 ........................................... 5
Notes to Financial Statements (Unaudited) ............................. 6-8
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations ............................................. 9-12
Item 3 - Quantitative and Qualitative Discussion About Market Risk* ................... 10
Part II Other Information
Item 1 - Legal Proceedings ............................................................ 13
Item 6 - Exhibits and Reports on Form 8-K ............................................. 13
Signature ........................................................................................ 14
</TABLE>
*This is presented in Part I, Item 2 and is incorporated herein by reference.
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
THE STUDENT LOAN CORPORATION
STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
March 31,
------------------------
2000 1999
-------- --------
REVENUE
<S> <C> <C>
Interest income $226,587 $171,401
Interest expense 162,740 114,559
-------- --------
NET INTEREST INCOME 63,847 56,842
Provision for loan losses 1,238 800
-------- --------
Net interest income after provision for loan losses 62,609 56,042
Fee and other income 1,056 948
-------- --------
TOTAL REVENUE, NET $ 63,665 $ 56,990
-------- --------
OPERATING EXPENSES
Salaries and employee benefits $ 4,234 $ 5,945
Other expenses 13,614 11,385
-------- --------
TOTAL OPERATING EXPENSES $ 17,848 $ 17,330
-------- --------
INCOME BEFORE INCOME TAXES $ 45,817 $ 39,660
Income taxes 19,032 16,524
-------- --------
NET INCOME $ 26,785 $ 23,136
======== ========
DIVIDENDS DECLARED $ 12,000 $ 6,000
======== ========
BASIC AND DILUTED EARNINGS PER COMMON SHARE - $ 1.34 $ 1.16
======== ========
(based on 20 million average shares outstanding)
DIVIDENDS DECLARED PER COMMON SHARE $ 0.60 $ 0.30
======== ========
OPERATING RATIOS (annualized)
Net interest margin 2.25% 2.58%
Operating expenses as a percentage of
average insured student loans 0.63% 0.79%
</TABLE>
See accompanying notes to financial statements.
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THE STUDENT LOAN CORPORATION
BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
(Unaudited)
----------- -----------
ASSETS
<S> <C> <C>
Insured student loans $11,778,011 $10,864,980
Allowance for loan losses 3,769 3,768
----------- -----------
Insured student loans, net 11,774,242 10,861,212
Cash 3,940 251
Deferred tax benefits 23,385 24,325
Other assets 355,573 310,680
----------- -----------
TOTAL ASSETS $12,157,140 $11,196,468
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term borrowings $ 8,216,101 $ 7,312,061
Long-term notes 3,222,000 3,222,000
Payable to principal stockholder 10,988 11,552
Other liabilities 178,134 135,723
----------- -----------
Total Liabilities 11,627,223 10,681,336
----------- -----------
Common stock 200 200
Additional paid-in capital 134,523 134,523
Retained earnings 395,194 380,409
----------- -----------
Total Stockholders' Equity 529,917 515,132
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $12,157,140 $11,196,468
=========== ===========
AVERAGE INSURED STUDENT LOANS $11,422,480 $ 9,406,600
=========== ===========
(year-to-date)
</TABLE>
See accompanying notes to financial statements.
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THE STUDENT LOAN CORPORATION
STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
March 31,
--------------------------
2000 1999
--------- ---------
Cash flows from operating activities:
<S> <C> <C>
Net income $ 26,785 $ 23,136
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation and amortization 6,242 1,808
Provision for loan losses 1,238 800
Deferred tax provision 940 1,129
Increase in accrued interest receivable (48,174) (15,374)
Decrease in other assets 5,014 485
Increase (Decrease) in other liabilities 41,848 (3,284)
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 33,893 8,700
--------- ---------
Cash flows from investing activities:
Disbursements of loans (877,848) (659,292)
Repayment of loans 490,370 294,020
Purchase of loans (573,261) (20,794)
Sale of loans 40,331 61,714
Capital expenditures on furniture and equipment (1,836) (42)
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES (922,244) (324,394)
--------- ---------
Cash flows from financing activities:
Net increase (decrease) in borrowings with original
maturities of one year or less 904,040 126,900
Proceeds from long-term borrowings -- 195,000
Dividends paid to stockholders (12,000) (6,000)
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 892,040 315,900
--------- ---------
NET INCREASE (DECREASE) IN CASH 3,689 206
CASH - BEGINNING OF PERIOD 251 37
--------- ---------
CASH - END OF PERIOD $ 3,940 $ 243
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for:
Interest $ 125,853 $ 121,360
Income taxes $ 11,154 $ 1,161
</TABLE>
See accompanying notes to financial statements.
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THE STUDENT LOAN CORPORATION
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 2000
1. SIGNIFICANT ACCOUNTING POLICIES
INTERIM FINANCIAL INFORMATION
The financial information of The Student Loan Corporation (the
"Company") as of March 31, 2000 and for the three month periods ended
March 31, 2000 and 1999 includes all adjustments (consisting of normal
recurring adjustments) which, in the opinion of management, are
necessary to fairly state the Company's financial position and results
of operations in conformity with generally accepted accounting
principles ("GAAP"). The accompanying unaudited financial statements
should be read in conjunction with the financial statements and
related notes included in the Company's 1999 Annual Report and Form
10-K.
2. USE OF ESTIMATES
In preparing the financial statements in conformity with GAAP,
management has used a number of estimates and assumptions relating to
the reporting of assets and liabilities, the disclosure of contingent
assets and liabilities and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates and assumptions.
3. COMMITMENTS AND CONTINGENCIES
REGULATORY IMPACTS
The Company's loan portfolio is primarily comprised of loans
originated under the Federal Family Education Loan ("FFEL") program.
Since 1992, a series of amendments to the Higher Education Act of 1965
(the "Act"), which governs the FFEL program, have increased costs and
reduced interest payments to lenders. These legislative changes have
progressively reduced the net interest margin of the Company's
portfolio.
4. RELATED PARTY TRANSACTIONS
Citibank (New York State) ("CNYS"), a wholly-owned subsidiary of
Citicorp and Citigroup Inc., owns 80% of the outstanding common stock
of the Company. A number of significant transactions are carried out
between the Company on the one hand and Citigroup Inc. and its
affiliates on the other hand. At March 31, 2000, the Company had
outstanding short-term and long-term borrowings with CNYS of $ 8.2
billion and $3.2 billion, respectively, compared to $7.3 billion and
$3.2 billion, respectively, at December 31, 1999. For the three month
period ended March 31, 2000, the Company incurred $162.7 million in
interest expense payable to CNYS and its affiliates, compared to
$114.6 million for the same period in 1999. In addition, Citigroup
Inc. and its subsidiaries engage in other transactions and servicing
activities with the Company, including cash management, data
processing, income tax payments, loan servicing,
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employee benefits and payroll administration, and facilities
management. Management believes that the terms of these transactions
are, in the aggregate, no less favorable to the Company than those
which could be obtained from unaffiliated parties.
5. INTEREST RATE SWAP AGREEMENTS
To better match the interest rate characteristics of its borrowings
with its loan assets, the Company, from time to time, enters into
interest rate swap agreements, generally with an affiliate of CNYS, on
portions of its portfolio. The swap agreements are intended to reduce
the risk caused by differences between borrowing and lending rates.
The Company generally receives payments based on the three-month LIBOR
and makes payments based on the asset yield, usually the 91-day
Treasury Bill rate. Entering into basis swap agreements to receive
interest based on the characteristics of the Company's liabilities and
pay interest based on the interest rate characteristics of the
Company's assets effectively reduces the risk of the potential
interest rate variability.
For the first quarter of 2000 and the fourth quarter of 1999, the
Company had no interest rate swap agreements outstanding and managed
interest rate risk directly through its funding agreements. However,
for the first quarter of 1999, the Company had swap transactions which
reduced interest expense by $1.0 million.
6. SHORT AND LONG-TERM BORROWINGS
In the first three months of 2000, short-term debt increased by $0.9
billion to $8.2 billion. Long-term borrowings of $3.2 billion at March
31, 2000 remained consistent with that outstanding at December 31,
1999.
7. FUTURE IMPACTS OF RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 133,
"Accounting for Derivative Instruments and Hedging Activities" (SFAS
No. 133). In June 1999, the FASB issued SFAS No. 137, "Accounting for
Derivative Instruments and Hedging Activities - Deferral of the
Effective Date of FASB Statement No. 133," which delayed the effective
date of SFAS No. 133 to January 1, 2001 for calendar year companies
such as the Company. In March 2000, the FASB proposed an amendment of
SFAS No. 133. The new standard will significantly change the
accounting treatment of end-user derivative contracts used by the
Company. Depending on the underlying risk management strategy, these
accounting changes could affect reported earnings, assets,
liabilities, and stockholders' equity. As a result, the Company will
have to reconsider its risk management strategies, since the new
standard will not reflect the results of many of those strategies in
the same manner as current accounting practice. The Company continues
to evaluate the potential impact of implementing the new accounting
standard, which will depend, among other things, on the amendment and
additional interpretations of the standard prior to the effective
date.
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8. CONTINGENCIES
A consolidated stockholder complaint is pending against the Company.
See "Legal Proceedings" in Part II of this filing for further
information.
Also, various legal proceedings arising out of the normal course of
business are pending against the Company. However, management presently
believes that the aggregate liability arising from these proceedings
will not be material to the Company's financial position or results of
operations.
In recent years, amendments to the Act have significantly reduced the
net interest margin of the guaranteed student loan portfolio as new
loans with lower yields were added to the portfolio and older, more
profitable loans were repaid. Pressure on margins will continue as more
loans are originated with lower yields. In addition, the Act may be
amended by Congress at any time, possibly resulting in further
reductions in FFEL Program loan subsidies in the form of increased
risk-sharing costs and reduced interest margins. Any such amendments
could adversely affect the Company's business and prospects.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
FORWARD-LOOKING STATEMENTS
Certain statements contained in this report that are not historical facts are
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act. The Student Loan Corporation's (the "Company's") actual
results may differ materially from those suggested by the forward-looking
statements, which are typically identified by the words or phrases "believe,"
"expect," "anticipate," "intend", "estimate," "may increase," "may result in,"
and similar expressions or future or conditional verbs such as "will", "should",
"would" and "could". These forward-looking statements involve risks and
uncertainties including, but not limited to, the following: the effects of
future legislative changes; actual credit losses experienced by the Company in
future periods compared to the estimates used in calculating reserves;
fluctuations in the interest rates paid by the Company for its funding and
received on its loan portfolio; the success of the Company's hedging policies;
the successful resolution of legal proceedings; as well as general economic
conditions, including the performance of financial markets and the passage of
regulatory changes.
FINANCIAL CONDITION
During the three months ended March 31, 2000, the net insured student loan
portfolio of the Company grew by $913.0 million (8%) from the balance at
December 31, 1999. This growth was the result of loan disbursements totaling
$877.8 million and loan purchases of $573.3 million in the first three months of
2000, partially offset by $40.3 million in loan sales and $490.4 million in loan
reductions (attributable to repayments and claims paid by guarantors), and other
adjustments of $7.4 million. This compares to loan disbursements of $659.3
million, loan purchases of $20.8 million, loan sales of $61.7 million, loan
reductions of $294.0 million, and other adjustments of $2.6 million in the first
three months of 1999. The increase in loan purchases for the first quarter of
2000 compared to the same period in 1999 is primarily attributable to the
Company's ongoing loan portfolio acquisition efforts.
The Company's loan disbursements and new CitiAssist loan commitments for the
first three months of 2000 of $1,008.6 million were $272.2 million (37%) more
than those made in the same period of 1999. This increase is attributable
primarily to large increases in new CitiAssist loan commitments and Federal
Consolidation program loan disbursements. During the first three months of 2000,
new CitiAssist loan commitments increased to $130.7 million, a $53.6 million
(70%) increase from the same period last year. FFEL Program Stafford and Plus
loan disbursements of $668.2 million in the first three months of 2000 is $76.9
million (13% ) higher than the $591.2 million disbursed during the same period
of 1999. Federal Consolidation program loan originations of $209.7 million for
the first quarter of 2000 have increased $141.6 million (208%) compared to the
same period of 1999.
During the first quarter of 2000, the Company made $125.9 million in interest
payments, principally to CNYS or one of its affiliates, compared to $121.4
million for the same period in 1999. The Company paid $11.2 million in income
taxes during the first quarter of 2000, compared to $1.2 million for the same
period last year. The difference in the amount of taxes
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paid is primarily due to timing differences in making intercompany tax payments,
and does not reflect any significant changes in applicable income tax rates.
Other assets at March 31, 2000 increased $44.9 million (14%) from December 31,
1999, principally as a result of additional interest receivable attributable to
growth in the student loan portfolio and timing of interest receipts. Other
liabilities, principally comprised of accrued interest and income taxes payable,
increased $42.4 million (31%) from December 31, 1999, primarily due to timing
differences in making intercompany interest and tax payments.
In the first three months of 2000, short-term debt increased by $0.9 billion to
$8.2 billion. Long-term borrowings of $3.2 billion at March 31, 2000 remained
consistent with that outstanding at December 31, 1999.
The Company paid a quarterly dividend of $0.60 per common share on March 1,
2000. The Board of Directors declared a regular quarterly dividend on the
Company's common stock of $0.60 per share to be paid June 1, 2000 to
stockholders of record on May 15, 2000.
RISK MANAGEMENT
Risk management is an important business objective of the Company. The Company
actively manages market, price and other risks. For further information, see
"Risk Management" beginning on page 6 of the Company's Annual Report on Form
10-K for the year ended December 31, 1999.
MARKET RISK
The Company's primary market risk exposure is to movements in U.S. dollar
interest rates. Market risk is measured using various tools, including
Earnings-at-Risk which reflects the repricing gaps in the position as well as
option positions, both explicit and embedded. The Company prepares
Earnings-at-Risk calculations to measure the discounted pre-tax earnings impact
over a preset time span of a specified shift in the interest rate yield curve.
The yield curve shift is statistically derived as a two standard deviation
change in short-term interest rates over the period required to defease the
position (usually two weeks). As of March 31, 2000, the rate shift over a
two-week defeasance period applied to the interest rate yield curve for purposes
of calculating Earnings-at-Risk was 45 basis points.
The Earnings-at-Risk tables below portray the Company's exposure to
fluctuations in interest rates using a static approach to the balance sheet mix
and parallel shifts in the interest rate curves. As of March 31, 2000, a 45
basis point (two standard deviation) increase in the interest yield curve would
have a potential positive impact on the Company's pretax earnings of
approximately $7.49 million in the next twelve months, and a potential positive
impact of approximately $1.80 million for the total five-year period 2001-2005.
A two standard deviation decrease in the interest yield curve would have a
potential negative impact on the Company's pretax earnings of approximately
$6.07 million in the next twelve months, and approximately $3.20 million
positive impact for the five-year period 2001-2005.
<TABLE>
<CAPTION>
Earnings-at-Risk (on pre-tax earnings) as of March 31, 2000
(Dollars in millions) 2001 2002 2003 2004 2005 Total
<S> <C> <C> <C> <C> <C> <C>
Two standard deviation increase $ 7.49 $ (1.12) $ (1.52) $ (1.53) $ (1.52) $ 1.80
Two standard deviation decrease $ (6.07) $ 2.34 $ 2.54 $ 2.32 $ 2.07 $ 3.20
</TABLE>
<TABLE>
<CAPTION>
Earnings-at-Risk (on pre-tax earnings) as of March 31, 1999
(Dollars in millions) 2000 2001 2002 2003 2004 Total
<S> <C> <C> <C> <C> <C> <C>
Two standard deviation increase $ (4.60) $ (4.00) $ (3.80) $ (3.30) $ (2.80) $ (18.50)
Two standard deviation decrease $ 6.20 $ 5.00 $ 4.70 $ 4.10 $ 3.50 $ 23.50
</TABLE>
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The Company, through its Asset/Liability Management Committee, actively manages
these risks by setting Earnings-at-Risk limits and takes appropriate actions if
interest rates move against the existing structure.
RESULTS OF OPERATIONS
Quarter Ended March 31, 2000
Net income was $26.8 million ($1.34 basic and diluted earnings per share) for
the first quarter of 2000. This was an increase of $3.6 million (16%) from
earnings for the same period last year. The increase in net income was primarily
attributable to higher interest income generated by loan portfolio growth
resulting from loan originations and ongoing loan portfolio acquisition efforts.
The net interest margin for the first quarter of 2000 was 2.25%, 0.33% lower
than the 2.58% margin for the first quarter of 1999. The decline in the margin
was primarily attributable to increased purchased loan premium amortization from
recent portfolio acquisitions and less favorable funding spreads compared to
those received during the same period last year. The pressure on margins is
expected to continue during 2000 as new loans with lower interest spreads are
added and older more profitable loans are repaid, and as the Company's
acquisition efforts continue.
Total operating expenses for the first quarter of 2000 increased $0.5 million
(3%) from the same period last year, primarily due to an increase of $2.0
million (compared to the same period last year) in fees and other costs to
procure and service the significantly larger loan portfolio. This amount was
partially offset by costs deferred by the Company in the first quarter of 2000
due to a change in the Company's capitalization threshold for computer software,
which resulted in the deferral of $1.7 million (pretax) of first quarter 2000
software development costs. Also, operating expenses as a percentage of average
insured student loans improved 0.16% to 0.63% from the first quarter of 1999
expense ratio of 0.79%. The improvement in the expense ratio is primarily
attributable to efficiencies in administrative and operational expenses.
Return on equity was 20.5% for the first quarter of 2000, 1.1% higher than the
19.4% return for the same period of 1999. The increase was attributed to higher
earnings.
The Company's effective tax rate was approximately 41.5% for the first three
months of 2000, compared to 41.7% for the same period in 1999.
REGULATORY IMPACTS
In recent years the Company's loan portfolio, comprised primarily of loans
originated under the FFEL Program, has been subject to increased costs and
reduced interest margin brought about by the Higher Education Act of 1965, as
amended, which governs the FFEL Program. Pressure on margins will continue as
more loans are originated with lower yields.
In order to counteract the reduced net interest margin on the Company's loan
portfolio resulting from these legislative changes, the Company has aggressively
pursued both new and existing marketing programs, expanded its guarantor
relationships and sought new ways to meet the education finance needs of schools
and students, including the implementation of loan programs, such as the
Company's CitiAssist product, that are not dependent on Federal funding,
guarantees
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and authorization. The Company is also seeking to continue to increase the size
of its portfolio to take advantage of greater economies of scale.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
For information concerning three stockholder derivatives complaints captioned
Alan Kahn v. Citigroup Inc., Kenneth Steiner v. Citigroup Inc., and Katherine F.
Petty v. Citigroup Inc., see the description that appears in the fifth and sixth
paragraphs under the caption "Legal Proceedings" beginning on page 13 of the
Company's Annual Report on Form 10-K for the year ended December 31, 1999 (File
No. 1-11616), which description is included as Exhibit 99.1 to this Form 10-Q
and incorporated by reference herein. In April 2000, the Delaware Chancery Court
consolidated the three complaints for all purposes under the caption In re The
Student Loan Corp. Derivative Litigation, and designated the Alan Kahn v.
Citigroup Inc. complaint as the operative pleading.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
27 Financial Data Schedule
99.1 Fifth and sixth paragraphs under the caption "Legal
Proceedings" beginning on page 13 of the Company's Annual
Report on Form 10-K for the year ended December 31, 1999
(File No. 1-11616)
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the first quarter of 2000.
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SIGNATURE
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.
Date: May 11, 2000
The Student Loan Corporation
By /s/ Yiannis Zographakis
Yiannis Zographakis
Vice President and
Chief Financial Officer
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE STUDENT
LOAN CORPORATION CURRENT REPORT ON FORM 10-Q FOR THE THREE MONTH PERIOD ENDED
MARCH 31, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 3,940
<SECURITIES> 0
<RECEIVABLES> 11,778,011
<ALLOWANCES> 3,769
<INVENTORY> 0
<CURRENT-ASSETS> 357,065
<PP&E> 12,491
<DEPRECIATION> 10,043
<TOTAL-ASSETS> 12,157,140
<CURRENT-LIABILITIES> 8,394,235
<BONDS> 3,222,000
0
0
<COMMON> 200
<OTHER-SE> 529,717
<TOTAL-LIABILITY-AND-EQUITY> 12,157,140
<SALES> 226,587
<TOTAL-REVENUES> 227,643
<CGS> 162,740
<TOTAL-COSTS> 162,740
<OTHER-EXPENSES> 17,848
<LOSS-PROVISION> 1,238
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 45,817
<INCOME-TAX> 19,032
<INCOME-CONTINUING> 26,785
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 26,785
<EPS-BASIC> 1.34
<EPS-DILUTED> 1.34
</TABLE>
<PAGE> 1
EXHIBIT 99.1
FIFTH AND SIXTH PARAGRAPHS UNDER THE CAPTION "LEGAL PROCEEDINGS" BEGINNING ON
PAGE 13 OF THE ANNUAL REPORT ON FORM 10-K OF THE COMPANY FOR THE YEAR ENDED
DECEMBER 31, 1999 (FILE NO. 1-11616).
Later in February, three stockholders' derivative complaints, captioned Alan
Kahn v. Citigroup Inc., Kenneth Steiner v. Citigroup Inc., and Katherine F.
Petty v. Citigroup Inc., were filed in Delaware Chancery Court against the
Company and its directors (as well as Citigroup and certain subsidiaries). The
complaints allege, among other things, that defendants breached their fiduciary
duties by engaging in a series of self-dealing transactions that are unfair to
the Company and a waste of corporate assets. Plaintiffs assert that Citigroup
will continue to self-deal to benefit itself and further depress the price of
the Company's outstanding public stock so it can acquire the stock at a
depressed price in the future.
Each complaint seeks various forms of relief, including unspecified monetary
damages, rescission of certain contracts and transactions, and declaratory and
injunctive relief prohibiting Citigroup and its subsidiaries from engaging in
further self-dealing with the Company and requiring Citigroup and its
subsidiaries to conduct all future business with independent directors and
officers of the Company.
