PNC Bank 2009 Annual Report Download - page 115

Loans whose contractual terms have been restructured in a
manner which grants a concession to a borrower experiencing
financial difficulties where we do not receive adequate
compensation are considered troubled debt restructurings.
Troubled debt restructurings typically result from our loss
mitigation activities and could include rate reductions,
principal forgiveness, forbearance and other actions intended
to minimize the economic loss and to avoid foreclosure or
repossession of collateral. Troubled debt restructurings
included in total nonperforming loans in the table above
totaled $440 million at December 31, 2009.
Net interest income less the provision for credit losses was
$5.1 billion for 2009 compared with $2.3 billion for 2008 and
$2.6 billion for 2007.
Changes in the allowance for loan and lease losses follow:
In millions 2009 2008 2007
January 1 $ 3,917 $ 830 $ 560
Charge-offs (3,155) (618) (245)
Recoveries 444 79 45
Net charge-offs (2,711) (539) (200)
Provision for credit losses 3,930 1,517 315
Acquired allowance – National City (112) 2,224
Acquired allowance – other 20 152
Net change in allowance for unfunded
loan commitments and letters of
credit 48 (135) 3
December 31 $ 5,072 $3,917 $ 830
See Note 6 Purchased Impaired Loans Related to National
City for a discussion of the release of allowance for loan and
lease losses related to additional impaired loans identified
during 2009.
Changes in the allowance for unfunded loan commitments and
letters of credit follow:
In millions 2009 2008 2007
Allowance at January 1 $344 $134 $120
Acquired allowance 75 17
Net change in allowance for unfunded loan
commitments and letters of credit (48) 135 (3)
December 31 $296 $344 $134
Originated impaired loans exclude leases and smaller
homogeneous type loans as well as purchased impaired loans
related to our acquisition of National City. We did not
recognize any interest income on originated loans while they
were impaired in 2009, 2008 or 2007. The following table
provides further detail on impaired loans and the associated
allowance for loan losses:
Originated Impaired Loans (a)
In millions
Dec. 31
2009
Dec. 31
2008
Impaired loans with an associated reserve $3,475 $1,249
Impaired loans without an associated reserve 471 93
Total impaired loans $3,946 $1,342
Specific allowance for credit losses $1,148 $ 405
Average impaired loan balance (b) $2,909 $ 674
(a) Purchased impaired loans related to our acquisition of National City are excluded
from this table and are disclosed in Note 6 Purchased Impaired Loans Related to
National City.
(b) Average for year ended.
N OTE 6P URCHASED I MPAIRED L OANS
R ELATED TO N ATIONAL C ITY
At December 31, 2008, we identified certain loans related to
the National City acquisition, for which there was evidence of
credit quality deterioration since origination and it was
probable that we would be unable to collect all contractually
required principal and interest payments. Evidence of credit
quality deterioration included statistics such as past due status,
declines in current borrower FICO credit scores, geographic
concentration and increases in current loan-to-value ratios.
GAAP requires these loans to be recorded at fair value at
acquisition date and prohibits the “carrying over” or the
creation of valuation allowances in the initial accounting for
such loans acquired in a transfer.
GAAP allows purchasers to aggregate impaired loans acquired
in the same fiscal quarter into one or more pools, provided
that the loans have common risk characteristics. A pool is then
accounted for as a single asset with a single composite interest
rate and an aggregate expectation of cash flows. With respect
to the National City acquisition, we aggregated homogeneous
consumer and residential real estate loans into pools with
common risk characteristics. We account for commercial and
commercial real estate loans individually.
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