PNC Bank 2001 Annual Report Download - page 79

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NOTE 11 ALLOWANCE FOR CREDIT LOSSES
Changes in the allowance for credit losses were as follows:
In millions 2001 2000 1999
January 1 $675 $674 $753
Charge-offs (985) (186) (216)
Recoveries 37 51 55
Net charge-offs (948) (135) (161)
Provision for credit losses 903 136 163
Sale of credit card business (81)
December 31 $630 $675 $674
Impaired loans totaling $192 million and $316 million at
December 31, 2001 and 2000, respectively, had a
corresponding specific allowance for credit losses of $28
million and $76 million. The average balance of impaired
loans was $319 million in 2001, $277 million in 2000 and
$243 million in 1999. There was no interest income
recognized on impaired loans in 2001, 2000 or 1999.
NOTE 12 PREMISES, EQUIPMENT AND
LEASEHOLD IMPROVEMENTS
Premises, equipment and leasehold improvements, stated at
cost less accumulated depreciation and amortization, were as
follows:
December 31 - in millions 2001 2000
Land $87 $86
Buildings 448 456
Equipment 1,413 1,373
Leasehold improvements 321 190
T
ota
l
2,269 2,105
Accumulated depreciation and
amortization (1,141) (1,069)
Net book value $1,128 $1,036
Depreciation and amortization expense on premises,
equipment and leasehold improvements totaled $168 million
in 2001, $149 million in 2000 and $204 million in 1999.
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 $165
million in 2001, $148 million in 2000 and $132 million in
1999.
At December 31, 2001 and 2000, required minimum
annual rentals due on noncancelable leases having terms in
excess of one year aggregated $908 million and $684 million,
respectively. Minimum annual rentals for each of the years
2002 through 2006 are $125 million, $115 million, $104
million, $96 million and $85 million, respectively.
In the fourth quarter of 2001, management of PFPC
Worldwide Inc., a majority-owned subsidiary of the
Corporation, initiated a plan to consolidate certain facilities
as a follow-up to the integration of the Investor Services
Group acquisition. In connection with this initiative and
other strategic actions in the fourth quarter 2001, pretax
charges to noninterest expense of $36 million were
recognized in the fourth quarter. The charges primarily
reflect termination costs related to exiting certain lease
agreements and the abandonment of related leasehold
improvements.
During 1999, PNC made the decision to sell various
branches and office buildings. 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.
NOTE 13 GOODWILL AND OTHER AMORTIZABLE
ASSETS
Goodwill and other amortizable assets, net of amortization,
consisted of the following:
December 31 - in millions 2001 2000
Goodwill $2,043 $2,155
Customer-related intangibles 131 157
Commercial mortgage
servicing rights 199 156
Total $2,373 $2,468
Amortization of goodwill and other amortizable assets was
as follows:
Year ended December 31
In millions 2001 2000 1999
Goodwill $117 $116 $80
Purchased credit cards 6
Commercial mortgage
servicing rights 27 18 20
Other (12) (6) 6
Total $132 $128 $112
In addition, write-downs of $11 million related to
impairment of goodwill for the year ended December 31,
2001 resulted from PNC’s decision to discontinue its vehicle
leasing business.