PNC Bank 2010 Annual Report Download - page 111
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NVESTMENTS
We hold interests in various types of investments. The
accounting for these investments is dependent on a number of
factors including, but not limited to, items such as:
• Ownership interest,
• Our plans for the investment, and
• The nature of the investment.
Debt Securities
Debt securities are recorded on a trade-date basis. We classify
debt securities as held to maturity and carry them at amortized
cost if we have the positive intent and ability to hold the
securities to maturity. Debt securities that we purchase for
short-term appreciation or other trading purposes are carried at
fair value and classified as trading securities and other assets
on our Consolidated Balance Sheet. Realized and unrealized
gains and losses on trading securities are included in Other
noninterest income.
Debt securities not classified as held to maturity or trading are
designated as securities available for sale and carried at fair
value with unrealized gains and losses, net of income taxes,
reflected in Accumulated other comprehensive income (loss).
We review all debt securities that are in an unrealized loss
position for other-than-temporary impairment (OTTI). We
evaluate outstanding available for sale and held to maturity
securities for other-than-temporary impairment on at least a
quarterly basis. An investment security is deemed impaired if
the fair value of the investment is less than its amortized cost.
Amortized cost includes adjustments (if any) made to the cost
basis of an investment for accretion, amortization, previous
other-than-temporary impairments and hedging gains and
losses. After an investment security is determined to be
impaired, we evaluate whether the decline in value is other-
than-temporary. As part of this evaluation, we take into
consideration whether we intend to sell the security or whether
it is more likely than not that we will be required to sell the
security before expected recovery of its amortized cost. We
also consider whether or not we expect to receive all of the
contractual cash flows from the investment based on factors
that include, but are not limited to: the creditworthiness of the
issuer and, in the case of securities collateralized by consumer
and commercial loan assets, the historical and projected
performance of the underlying collateral; and the length of
time and extent that fair value has been less than amortized
cost. In addition, we may also evaluate the business and
financial outlook of the issuer, as well as broader industry and
sector performance indicators. Declines in the fair value of
available for sale debt securities that are deemed other-than-
temporary and are attributable to credit deterioration are
recognized on our Consolidated Income Statement in the
period in which the determination is made. Declines in fair
value which are deemed other-than-temporary and attributable
to factors other than credit deterioration are recognized in
Accumulated other comprehensive income (loss) on our
Consolidated Balance Sheet.
We include all interest on debt securities, including
amortization of premiums and accretion of discounts on
available for sale securities, in Net interest income using the
constant effective yield method. We compute gains and losses
realized on the sale of available for sale debt securities on a
specific security basis. These securities gains/ (losses) are
included in the caption Net gains on sales of securities on the
Consolidated Income Statement.
In certain situations, management may elect to transfer certain
debt securities from the securities available for sale to the held
to maturity classification. In such cases, any unrealized gain or
loss at the date of transfer included in Accumulated other
comprehensive income (loss) is amortized over the remaining
life of the security as a yield adjustment. This amortization
effectively offsets or mitigates the effect on interest income of
the amortization of the premium or accretion of the discount
on the security.
Equity Securities and Partnership Interests
We account for equity securities and equity investments other
than BlackRock and private equity investments under one of
the following methods:
• Marketable equity securities are recorded on a trade-
date basis and are accounted for based on the
securities’ quoted market prices from a national
securities exchange. Dividend income on these
securities is recognized in Net interest income. Those
purchased with the intention of recognizing short-
term profits are classified as trading and included in
trading securities and other assets on our
Consolidated Balance Sheet. Both realized and
unrealized gains and losses on trading securities are
included in Noninterest income. Marketable equity
securities not classified as trading are designated as
securities available for sale with unrealized gains and
losses, net of income taxes, reflected in Accumulated
other comprehensive income (loss). Any unrealized
losses that we have determined to be other-than-
temporary on securities classified as available for
sale are recognized in current period earnings.
• For investments in limited partnerships, limited
liability companies and other investments that are not
required to be consolidated, we use either the cost
method or the equity method of accounting. We use
the cost method for investments in which we are not
considered to have significant influence over the
operations of the investee and when cost
appropriately reflects our economic interest in the
underlying investment. Under the cost method, there
is no change to the cost basis unless there is an other-
than-temporary decline in value. If the decline is
determined to be other-than-temporary, we write
down the cost basis of the investment to a new cost
basis that represents realizable value. The amount of
the write-down is accounted for as a loss included in
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