PNC Bank 2009 Annual Report Download - page 36

Valuation of FASB ASC 310-30 Purchased Impaired Loans
December 31, 2008 (a) December 31, 2009
Dollars in billions Balance Net Investment Balance Net Investment
Commercial and commercial real estate loans:
Unpaid principal balance $ 6.3 $ 3.5
Purchased impaired mark (3.4) (1.3)
Recorded investment 2.9 2.2
Allowance for loan losses (.2)
Net investment 2.9 46% 2.0 57%
Consumer and residential mortgage loans:
Unpaid principal balance 15.6 11.7
Purchased impaired mark (5.8) (3.6)
Recorded investment 9.8 8.1
Allowance for loan losses (.3)
Net investment 9.8 63% 7.8 67%
Total FASB ASC 310-30 purchased impaired loans:
Unpaid principal balance 21.9 15.2
Purchased impaired mark (9.2)(b) (4.9)(b)
Recorded investment 12.7 10.3
Allowance for loan losses (.5)(c)
Net investment $12.7 58% $ 9.8 64%
(a) Subsequent to December 31, 2008, an additional $2.6 billion of acquired National City loans were identified as impaired under FASB ASC 310-30. A total fair value mark of $1.8
billion was recorded, resulting in a $.8 billion net investment. These impairments were effective December 31, 2008 based on additional information regarding the borrowers and
credit conditions that existed as of the acquisition date.
(b) Comprised of $5.5 billion of nonaccretable and $3.7 billion of accretable at December 31, 2008 and $1.4 billion of nonaccretable and $3.5 billion of accretable at December 31, 2009.
(c) An additional allowance for loan losses of $.5 billion does not recognize the incremental accretable yield of $.9 billion related to certain purchased impaired loans with improving
estimated cash flows. This income will be recognized over time.
The unpaid principal balance of purchased impaired loans
declined from $21.9 billion at December 31, 2008 to $15.2
billion at December 31, 2009 due to amounts determined to be
uncollectible, payoffs and disposals. The remaining purchased
impaired mark at December 31, 2009 was $4.9 billion and
declined from $9.2 billion at December 31, 2008 primarily
due to amounts determined to be uncollectible. The net
investment of $12.7 billion at December 31, 2008 declined to
$9.8 billion at December 31, 2009 primarily due to payoffs,
disposals and further impairment partially offset by accretion
during 2009.
We currently expect to collect total cash flows of $13.8 billion
on purchased impaired loans, representing the $10.3 billion
recorded investment at December 31, 2009 and the accretable
net interest of $3.5 billion shown in the Accretable Net
Interest table that follows.
Purchase Accounting Net Interest Accretion
Year ended December 31- in billions 2009
Non-impaired loans $.8
Impaired loans
Accretion .9
Cash recoveries .2
Total impaired loans 1.1
Reversal of contractual interest on impaired loans (.7)
Net impaired loans .4
Securities .1
Deposits 1.0
Borrowings (.3)
Total $2.0
Accretable Net Interest
In billions
Dec. 31
2008
Dec. 31
2009
Non-impaired loans $ 2.4 $ 1.6
Impaired loans (a) 3.7 3.5
Total loans (gross) 6.1 5.1
Securities .2 .1
Deposits (b) 2.1 1.0
Borrowings (1.5) (1.2)
Total $ 6.9 $ 5.0
(a) Adjustments to accretable net interest include purchase accounting accretion,
reclassifications from non-accretable to accretable interest as a result of increases in
estimated cash flows, and reductions in the accretable amount as a result of
additional loan impairments.
(b) Adjustments to accretable net interest include the impact of branch divestitures.
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