PNC Bank 2010 Annual Report Download - page 115
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Please find page 115 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.Subprime mortgage loans for first liens with a LTV ratio of
equal to or greater than 90% and second liens are classified as
nonaccrual at 90 days past due. These loans are charged off as
discussed above.
Most consumer loans and lines of credit, not secured by
residential real estate, are charged off after 120 to 180 days
past due. Generally, they are not placed on nonaccrual status
as permitted by regulatory guidance.
If payment is received on a nonperforming loan, the payment
is first applied to the past due principal; once this principal
obligation has been fulfilled, payments are applied to recover
any partial charge-off related to the impaired loan that might
exist. Finally, if both past due principal and any partial
charge-off have been recovered, then the payment will result
in the recognition and recording of interest income. This
process is followed for impaired loans with the exception of
performing troubled debt restructurings (TDRs). Payments
received on performing TDRs and other modified loans will
be applied in accordance with the terms of the modified loan.
A loan is categorized as a TDR if a concession is granted due
to deterioration in the financial condition of the borrower.
TDRs may include certain modifications of terms of loans,
receipts of assets from debtors in partial or full satisfaction of
loans, or a combination thereof. Modified loans classified as
TDRs are included in nonperforming loans until returned to
performing status through the fulfilling of contractual terms
for a reasonable period of time (generally 6 months).
See Note 5 Asset Quality and Allowances for Loan and Lease
Losses and Unfunded Loan Commitments and Letters of
Credit for additional TDR information.
Nonperforming loans are generally not returned to performing
status until the obligation is brought current and the borrower
has performed in accordance with the contractual terms for a
reasonable period of time and collection of the contractual
principal and interest is no longer in doubt.
Foreclosed assets are comprised of any asset seized or
property acquired through a foreclosure proceeding or
acceptance of a deed-in-lieu of foreclosure. Other real estate
owned is comprised principally of commercial real estate and
residential real estate properties obtained in partial or total
satisfaction of loan obligations. When legal proceedings are
initiated, and no remedies arise from the legal proceedings, the
property will be sold. When we acquire the deed, we transfer
the loan to other real estate owned included in Other assets on
our Consolidated Balance Sheet. Property obtained in
satisfaction of a loan is recorded at the lower of recorded
investment or estimated fair value less cost to sell. We
estimate fair values primarily based on appraisals, when
available, or quoted market prices on liquid assets.
Anticipated recoveries and government guarantees are also
considered in evaluating the potential impairment of loans at
the date of transfer. If the estimated fair value less cost to sell
is less than the recorded investment, a charge-off is
recognized against the ALLL.
Subsequently, foreclosed assets are valued at the lower of the
amount recorded at acquisition date or estimated fair value
less cost to sell. Valuation adjustments on these assets and
gains or losses realized from disposition of such property are
reflected in Other noninterest expense.
See Note 5 Asset Quality and Allowances for Loan and Lease
Losses and Unfunded Loan Commitments and Letters of
Credit for additional information.
A
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We maintain the ALLL at a level that we believe to be
adequate to absorb estimated probable credit losses incurred in
the loan portfolio as of the balance sheet date. Our
determination of the adequacy of the allowance is based on
periodic evaluations of the loan and lease portfolios and other
relevant factors. This evaluation is inherently subjective as it
requires material estimates, all of which may be susceptible to
significant change, including, among others:
• Probability of default (PD),
• Loss given default (LGD),
• Exposure at date of default (EAD),
• Amounts and timing of expected future cash flows,
• Value of collateral, and
• Qualitative factors such as changes in economic
conditions that may not be reflected in historical
results.
While our reserve methodologies strive to reflect all relevant
risk factors, there continues to be uncertainty associated with,
but not limited to, potential imprecision in the estimation
process due to the inherent time lag of obtaining information
and normal variations between estimates and actual outcomes.
We provide additional reserves that are designed to provide
coverage for losses attributable to such risks. The ALLL also
includes factors which may not be directly measured in the
determination of specific or pooled reserves. Such qualitative
factors include:
• Recent Credit quality trends,
• Recent Loss experience in particular portfolios,
• Recent Macro economic factors, and
• Changes in risk selection and underwriting standards.
In determining the adequacy of the ALLL, we make specific
allocations to impaired loans and allocations to portfolios of
commercial and consumer loans. We also allocate reserves to
provide coverage for probable losses incurred in the portfolio
at the balance sheet date based upon current market
conditions, which may not be reflected in historical loss data.
While allocations are made to specific loans and pools of
loans, the total reserve is available for all credit losses.
Nonperforming loans are considered impaired under ASC
310-Receivables and are allocated a specific reserve.
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