PNC Bank 2010 Annual Report Download - page 149
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DDITIONAL
F
AIR
V
ALUE
I
NFORMATION
R
ELATED TO
F
INANCIAL
I
NSTRUMENTS
December 31, 2010 December 31, 2009
In millions
Carrying
Amount
Fair
Value
Carrying
Amount
Fair
Value
Assets
Cash and short-term assets $ 9,711 $ 9,711 $ 12,248 $ 12,248
Trading securities 1,826 1,826 2,124 2,124
Investment securities 64,262 64,487 56,027 56,319
Loans held for sale 3,492 3,492 2,539 2,597
Net loans (excludes leases) 139,316 141,431 146,270 145,014
Other assets 4,664 4,664 4,883 4,883
Mortgage and other loan servicing rights 1,698 1,707 2,253 2,352
Financial derivatives
Designated as hedging instruments under GAAP 1,255 1,255 739 739
Not designated as hedging instruments under GAAP 4,502 4,502 3,177 3,177
Liabilities
Demand, savings and money market deposits 141,990 141,990 132,645 132,645
Time deposits 41,400 41,825 54,277 54,534
Borrowed funds 39,821 41,273 39,621 39,977
Financial derivatives
Designated as hedging instruments under GAAP 85 85 95 95
Not designated as hedging instruments under GAAP 4,850 4,850 3,744 3,744
Unfunded loan commitments and letters of credit 173 173 290 290
The aggregate fair values in the table above do not represent
the total market value of PNC’s assets and liabilities as the
table excludes the following:
• real and personal property,
• lease financing,
• loan customer relationships,
• deposit customer intangibles,
• retail branch networks,
• fee-based businesses, such as asset management and
brokerage, and
• trademarks and brand names.
We used the following methods and assumptions to estimate
fair value amounts for financial instruments.
G
ENERAL
For short-term financial instruments realizable in three months
or less, the carrying amount reported on our Consolidated
Balance Sheet approximates fair value. Unless otherwise
stated, the rates used in discounted cash flow analyses are
based on market yield curves.
C
ASH
A
ND
S
HORT
-T
ERM
A
SSETS
The carrying amounts reported on our Consolidated Balance
Sheet for cash and short-term investments approximate fair
values primarily due to their short-term nature. For purposes
of this disclosure only, short-term assets include the
following:
• due from banks,
• interest-earning deposits with banks,
• federal funds sold and resale agreements,
• cash collateral,
• customers’ acceptances, and
• accrued interest receivable.
S
ECURITIES
Securities include both the investment securities (comprised of
available for sale and held to maturity securities) and trading
portfolios. We use prices obtained from pricing services,
dealer quotes or recent trades to determine the fair value of
securities. For 60% of our positions, we use prices obtained
from pricing services provided by third party vendors. For an
additional 8% of our positions, we use prices obtained from
the pricing services as the primary input into the valuation
process. One of the vendors’ prices are set with reference to
market activity for highly liquid assets such as agency
mortgage-backed securities, and matrix pricing for other
assets, such as CMBS and asset-backed securities. Another
vendor primarily uses pricing models considering adjustments
for ratings, spreads, matrix pricing and prepayments for the
instruments we value using this service, such as non-agency
residential mortgage-backed securities, agency adjustable rate
mortgage securities, agency CMOs and municipal bonds.
Management uses various methods and techniques to
corroborate prices obtained from pricing services and dealers,
including reference to other dealers’ quotes, by reviewing
valuations of comparable instruments, or by comparison to
internal valuations. Dealer quotes received are typically non-
binding.
N
ET
L
OANS
A
ND
L
OANS
H
ELD
F
OR
S
ALE
Fair values are estimated based on the discounted value of
expected net cash flows incorporating assumptions about
prepayment rates, net credit losses and servicing fees. For
purchased impaired loans, fair value is assumed to equal
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