PNC Bank 2010 Annual Report Download - page 147
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Please find page 147 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.decreased. Other Level 3 assets include commercial mortgage
loans held for sale, certain equity securities, auction rate
securities, corporate debt securities, certain private-issuer
asset-backed securities, private equity investments, certain
derivative instruments, residential mortgage servicing rights
and other assets.
Nonrecurring Fair Value Changes
We may be required to measure certain other financial assets
at fair value on a nonrecurring basis. These adjustments to fair
value usually result from the application of
lower-of-cost-or-fair value accounting or write-downs of
individual assets due to impairment. The amounts below for
nonaccrual loans represent the carrying value of loans for
which adjustments are primarily based on the appraised value
of collateral or the net book value of the collateral from the
borrower’s most recent financial statements if no appraisal is
available. If the net book value is utilized, loss given default
(LGD) collateral recovery rates are employed, by collateral
type, in calculating disposition costs to arrive at an adjusted
fair value. If an appraisal is outdated due to changed project or
market conditions, values based on the LGD recovery rates are
used pending receipt of an updated appraisal. The amounts
below for loans held for sale represent the carrying value of
loans for which adjustments are based on the appraised value
of collateral which often results in significant management
assumptions and input with respect to the determination of fair
value, or based on an observable market price. The fair value
determination of the equity investment resulting in an
impairment loss included below was based on observable
market data for other comparable entities as adjusted for
internal assumptions and unobservable inputs. The amounts
below for commercial mortgage servicing rights reflect an
impairment of three strata at December 31, 2010 while no
strata were impaired at December 31, 2009. The fair value of
commercial mortgage servicing rights is estimated by using an
internal valuation model. The model calculates the present
value of estimated future net servicing cash flows considering
estimates of servicing revenue and costs, discount rates and
prepayment speeds.
Fair Value Measurements – Nonrecurring (a)
Fair Value
Gains (Losses)
Year ended
In millions
December 31
2010
December 31
2009
December 31
2010
December 31
2009
Assets
Nonaccrual loans $ 429 $ 939 $81 $(365)
Loans held for sale 350 168 (93) 4
Equity investments (b) 3154 (3) (64)
Commercial mortgage servicing rights 644 (40)
Other intangible assets 11
Foreclosed and other assets 245 108 (103) (41)
Long-lived assets held for sale 25 30 (30) (9)
Total assets $1,697 $1,400 $(188) $(475)
(a) All Level 3 except $5 million in loans held for sale which were Level 2 at December 31, 2009.
(b) Includes LIHTC and other equity investments.
F
AIR
V
ALUE
O
PTION
Refer to the Fair Value Measurement section of this Note 8
regarding the fair value of commercial mortgage loans held
for sale, residential mortgage loans held for sale, customer
resale agreements, and BlackRock Series C Preferred Stock.
Commercial Mortgage Loans Held for Sale
Interest income on these loans is recorded as earned and
reported on the Consolidated Income Statement in other
interest income. The impact on earnings of offsetting
economic hedges is not reflected in these amounts. Changes in
fair value due to instrument-specific credit risk for 2010 and
2009 were not material.
Residential Mortgage Loans Held for Sale
Interest income on these loans is recorded as earned and
reported on the Consolidated Income Statement in other
interest income. Throughout 2010 and 2009, certain
residential mortgage loans for which we elected the fair value
option were subsequently reclassified to portfolio loans.
Changes in fair value due to instrument-specific credit risk for
2010 and 2009 were not material. These loans continue to be
accounted for at fair value.
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