PNC Bank 2000 Annual Report Download - page 75

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72
NO T E 9 AL L O WA N C E F O R
CR E D I T LO S S E S
Changes in the allowance for credit losses were as follows:
In millions 2000 1999 1998
January 1 . . . . . . . . . . . . . . . . . $674 $753 $972
Charge-offs . . . . . . . . . . . . . . . . (186) (216) (524)
Recoveries . . . . . . . . . . . . . . . . 51 55 77
Net charge-offs . . . . . . . . . . . (135) (161) (447)
Provision for credit losses . . . . . 136 163 225
Sale of credit card business . . . (81)
Acquisitions . . . . . . . . . . . . . . . 3
December 31 . . . . . . . . . . . . $675 $674 $753
Impaired loans totaling $316 million and $241 million at
December 31, 2000 and 1999, respectively, had a corre-
sponding specific allowance for credit losses of $76 million
and $60 million. The average balance of impaired loans was
$277 million in 2000, $243 million in 1999, and $223 mil-
lion in 1998. There was no interest income recognized on
impaired loans in 2000 and 1999. Interest income recog-
nized on impaired loans in 1998 was $1 million.
NO T E 1 0 PR E M I S E S , E Q U I P M E N T
A N D LE A S E H O L D IM P R O V E M E N T S
Premises, equipment and leasehold improvements, stated at
cost less accumulated depreciation and amortization, were
as follows:
December 31 - in millions 2000 1999
Land . . . . . . . . . . . . . . . . . . . . . . $86 $83
Buildings . . . . . . . . . . . . . . . . . . . . 456 427
Equipment . . . . . . . . . . . . . . . . . . . 1,373 1,338
Leasehold improvements . . . . . . . . . 190 208
Total . . . . . . . . . . . . . . . . . . . . . . 2,105 2,056
Accumulated depreciation and
amortization . . . . . . . . . . . . . . . . (1,069) (1,154)
Net book value . . . . . . . . . . . . . . $1,036 $902
Depreciation and amortization expense on premises, equip-
ment and leasehold improvements totaled $149 million in
2000, $204 million in 1999 and $149 million in 1998.
Certain facilities and equipment are leased under
agreements expiring at various dates through the year 2071.
Substantially all such leases are accounted for as operating
leases. Rental expense on such leases amounted to
$148 million in 2000, $132 million in 1999 and $101 mil-
lion in 1998.
At December 31, 2000 and 1999, required minimum
annual rentals due on noncancelable leases having terms in
excess of one year aggregated $684 million and $749 mil-
lion, respectively. Minimum annual rentals for each of the
years 2001 through 2005 are $106 million, $97 million,
$89 million, $77 million and $66 million, respectively.
During 1999, PNC made the decision to sell various
branches and office buildings. Buildings that were designat-
ed for sale, but not sold during 1999 are classified as held
for sale. Initial write-downs were recorded in noninterest
expense and generally reflected the difference between book
value and appraised value less selling costs. Write-downs
totaled $35 million and subsequent net gains from disposals
totaled $8 million in 1999.
NO T E 1 1 GO O D W I L L A N D OT H E R
AM O R T I Z A B L E AS S E T S
Goodwill and other amortizable assets, net of amortization,
consisted of the following:
December 31 - in millions 2000 1999
Goodwill . . . . . . . . . . . . . . . . . . . . . $2,155 $2,222
Customer-related intangibles . . . . . . 157 165
Commercial mortgage
servicing rights . . . . . . . . . . . . . . 156 125
Total . . . . . . . . . . . . . . . . . . . . . . $2,468 $2,512
Amortization of goodwill and other amortizable assets was
as follows:
Year ended December 31 - in millions 2000 1999 1998
Goodwill . . . . . . . . . . . . . . . . . $116 $80 $67
Purchased credit cards . . . . . . . 6 36
Commercial mortgage
servicing rights . . . . . . . . . . . 18 20 12
Other . . . . . . . . . . . . . . . . . . (6) 6 7
Total . . . . . . . . . . . . . . . . . . $128 $112 $122
NO T E 1 2 SE C U R I T I Z AT I O N S
During 2000, the Corporation securitized commercial mort-
gage loans totaling $865 million and recorded a pretax gain
of $13 million. The Corporation retained servicing rights in
the securitized loans, all of which were sold and removed
from the balance sheet as a part of the securitization, and
recorded servicing rights of $7 million. The servicing rights
were valued based on expected future cash flows consider-
ing a 10% discount rate and an 8% prepayment rate on
mortgages with a weighted-average life of 10 years. Cash
received from securitization trusts totaled $877 million.