PNC Bank 2010 Annual Report Download - page 48
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Please find page 48 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.Residential Mortgage-Backed Securities
At December 31, 2010, our residential mortgage-backed
securities portfolio was comprised of $31.7 billion fair value
of US government agency-backed securities and $7.2 billion
fair value of non-agency (private issuer) securities. The
agency securities are generally collateralized by 1-4 family,
conforming, fixed-rate residential mortgages.The non-agency
securities are also generally collateralized by 1-4 family
residential mortgages. The mortgage loans underlying the
non-agency securities are generally non-conforming (i.e.,
original balances in excess of the amount qualifying for
agency securities) and predominately have interest rates that
are fixed for a period of time, after which the rate adjusts to a
floating rate based upon a contractual spread that is indexed to
a market rate (i.e., a “hybrid ARM”), or interest rates that are
fixed for the term of the loan.
Substantially all of the non-agency securities are senior
tranches in the securitization structure and at origination had
credit protection in the form of credit enhancement, over-
collateralization and/or excess spread accounts.
During 2010, we recorded OTTI credit losses of $242 million
on non-agency residential mortgage-backed securities. As of
December 31, 2010, $240 million of the credit losses related
to securities rated below investment grade. As of
December 31, 2010, the noncredit portion of OTTI losses
recorded in accumulated other comprehensive loss for
non-agency residential mortgage-backed securities totaled
$838 million and the related securities had a fair value of $3.8
billion.
The fair value of sub-investment grade investment securities
for which we have not recorded an OTTI credit loss as of
December 31, 2010 totaled $2.0 billion, with unrealized net
losses of $74 million. The results of our security-level
assessments indicate that we will recover the entire cost basis
of these securities. Note 7 Investment Securities in the Notes
To Consolidated Financial Statements in Item 8 of this Report
provides further detail regarding our process for assessing
OTTI for these securities.
Commercial Mortgage-Backed Securities
The fair value of the non-agency commercial mortgage-
backed securities portfolio was $6.3 billion at December 31,
2010 and consisted of fixed-rate, private-issuer securities
collateralized by non-residential properties, primarily retail
properties, office buildings, and multi-family housing. The
agency commercial mortgage-backed securities portfolio was
$1.8 billion fair value at December 31, 2010 consisting of
multi-family housing. Substantially all of the securities are the
most senior tranches in the subordination structure.
OTTI credit losses on non-agency commercial mortgage-
backed securities during 2010 were not significant. In
addition, the noncredit portion of OTTI losses recorded in
accumulated other comprehensive loss for these securities and
the related fair value at December 31, 2010 were not
significant. The remaining fair value of securities for which
OTTI has been recorded was $22 million. All of the credit-
impaired securities were rated below investment grade.
Asset-Backed Securities
The fair value of the asset-backed securities portfolio was $5.3
billion at December 31, 2010 and consisted of fixed-rate and
floating-rate, private-issuer securities collateralized primarily
by various consumer credit products, including residential
mortgage loans, credit cards, and automobile loans.
Substantially all of the securities are senior tranches in the
securitization structure and have credit protection in the form
of credit enhancement, over-collateralization and/or excess
spread accounts.
We recorded OTTI credit losses of $78 million on asset-
backed securities during 2010. All of the securities were
collateralized by first and second lien residential mortgage
loans and were rated below investment grade. As of
December 31, 2010, the noncredit portion of OTTI losses
recorded in accumulated other comprehensive loss for asset-
backed securities totaled $190 million and the related
securities had a fair value of $627 million.
For the sub-investment grade investment securities (available
for sale and held to maturity) for which we have not recorded
an OTTI loss through December 31, 2010, the remaining fair
value was $297 million, with unrealized net losses of $7
million. The results of our security-level assessments indicate
that we will recover the entire cost basis of these securities.
Note 7 Investment Securities in the Notes To Consolidated
Financial Statements in Item 8 of this Report provides further
detail regarding our process for assessing OTTI for these
securities.
If current housing and economic conditions were to worsen, if
market volatility and illiquidity were to worsen, or if market
interest rates were to increase appreciably, the valuation of our
investment securities portfolio could continue to be adversely
affected and we could incur additional OTTI credit losses that
would impact our Consolidated Income Statement.
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