PNC Bank 2010 Annual Report Download - page 114
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Please find page 114 of the 2010 PNC Bank annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.amended standard clarifies that an entity must consider all
arrangements or agreements made contemporaneously with or
in contemplation of a transfer even if not entered into at the
time of the transfer when applying surrender of control
conditions. See Recent Accounting Pronouncements in this
Note 1 for further details.
L
OANS
H
ELD
F
OR
S
ALE
We designate loans as held for sale when we have the intent to
sell them. We transfer loans to the Loans held for sale
category at the lower of cost or estimated fair value less cost
to sell. At the time of transfer, write-downs on the loans are
recorded as charge-offs. We establish a new cost basis upon
transfer. Any subsequent lower-of-cost-or-market adjustment
is determined on an individual loan basis and is recognized as
a valuation allowance with any charges included in Other
noninterest income. Gains or losses on the sale of these loans
are included in Other noninterest income when realized.
We have elected to account for certain commercial mortgage
loans held for sale at fair value. The changes in the fair value
of these loans are measured and recorded in Other noninterest
income each period. See Note 8 Fair Value for additional
information. Also, we elected to account for residential real
estate loans held for sale and securitizations acquired from
National City, which were not purchased impaired loans, at
fair value.
Interest income with respect to loans held for sale classified as
performing is accrued based on the principal amount
outstanding using a constant effective yield method.
In certain circumstances, loans designated as held for sale may
be transferred to held for investment based on a change in
strategy. We transfer these loans at the lower of cost or
estimated fair value; however, any loans held for sale and
designated at fair value will remain at fair value for the life of
the loan.
N
ONPERFORMING
A
SSETS
Nonperforming assets include:
• Nonaccrual loans,
• Troubled debt restructurings, and
• Foreclosed assets.
Nonperforming loans are those loans that have deteriorated in
credit quality to the extent that full collection of original
contractual principal and interest is doubtful. When a loan is
determined to be nonperforming (and as a result is impaired),
the accrual of interest is ceased and the loan is classified as
nonaccrual. The current year accrued and uncollected interest
is reversed out of net interest income.
A loan acquired and accounted for under ASC Sub-Topic
310-30 – Loans and Debt Securities Acquired with
Deteriorated Credit Quality is reported as an accruing loan and
a performing asset.
We generally classify Commercial Lending (Commercial,
Commercial Real Estate, and Equipment Lease Financing)
loans as nonaccrual (and therefore nonperforming) when we
determine that the collection of interest or principal is doubtful
or when delinquency of interest or principal payments has
existed for 90 days or more and the loans are not well-secured
and in the process of collection. A loan is considered well-
secured when the collateral in the form of liens on (or pledges
of) real or personal property, including marketable securities,
has a realizable value sufficient to discharge the debt in full,
including accrued interest. Such factors that would lead to
nonperforming status and subject to an impairment test would
include, but are not limited to, the following:
• Deterioration in the financial position of the borrower
resulting in the loan moving from accrual to cash
basis,
• The collection of principal or interest is 90 days or
more past due unless the asset is both well-secured
and in the process of collection,
• Reasonable doubt exists as to the certainty of the
future debt service ability, whether 90 days have
passed or not,
• Customer has filed or will likely file for bankruptcy,
• The bank advances additional funds to cover
principal or interest,
• We are in the process of liquidation of a commercial
borrower, or
• We are pursuing remedies under a guaranty.
We charge off commercial nonaccrual loans based on the facts
and circumstances of the individual loans.
Additionally, in general, small business commercial term
loans of less than $1 million and small business commercial
revolving loans are placed on nonaccrual status at 90 days past
due and charged off at 120 and 180 days past due,
respectively.
Home equity installment loans and lines of credit, as well as
residential real estate loans, that are well secured are classified
as nonaccrual at 180 days past due. A consumer loan is
considered well-secured when the collateral in the form of
liens on (or pledges of) real or personal property, including
marketable securities, have a realizable value sufficient to
discharge the debt in full, including accrued interest.
Home equity installment loans and lines of credit and
residential real estate loans that are not well secured and/or are
in the process of collection are charged off at 180 days past
due to the estimated fair value of the collateral less cost to sell.
The remaining portion of the loan is placed on nonaccrual
status.
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