PNC Bank 2011 Annual Report Download - page 106

market value of that same collateral. Market values of the
collateral are based on an independent valuation of the
collateral. For example, an LTV of less than 90% is better
secured and has less credit risk than an LTV of greater than or
equal to 90%.
Loss Given Default (LGD) – An estimate of recovery based
on collateral type, collateral value, loan exposure, or the
guarantor(s) quality and guaranty type (full or partial). Each
loan has its own LGD. The LGD risk rating measures the
percentage of exposure of a specific credit obligation that we
expect to lose if default occurs. LGD is net of recovery,
through either liquidation of collateral or deficiency
judgments rendered from foreclosure or bankruptcy
proceedings.
Net interest margin – Annualized taxable-equivalent net
interest income divided by average earning assets.
Nonaccretable difference – Contractually required payments
receivable on a purchased impaired loan in excess of the cash
flows expected to be collected.
Nondiscretionary assets under administration – Assets we hold
for our customers/clients in a non-discretionary, custodial
capacity. We do not include these assets on our Consolidated
Balance Sheet.
Nonperforming assets – Nonperforming assets include
non-accrual loans, certain non-accrual troubled debt
restructured loans, OREO, foreclosed and other assets. We do
not accrue interest income on assets classified as
nonperforming.
Nonperforming loans – Loans for which we do not accrue
interest income. Nonperforming loans include loans to
commercial, commercial real estate, equipment lease
financing, consumer (including loans and lines of credit
secured by residential real estate), and residential real estate
(including mortgages and construction) customers as well as
certain non-accrual troubled debt restructured loans.
Nonperforming loans do not include loans held for sale or
OREO and foreclosed assets. Nonperforming loans do not
include purchased impaired loans as we are currently
accreting interest income over the expected life of the loans.
Notional amount – A number of currency units, shares, or
other units specified in a derivative contract.
Operating leverage – The period to period dollar or percentage
change in total revenue (GAAP basis) less the dollar or
percentage change in noninterest expense. A positive variance
indicates that revenue growth exceeded expense growth (i.e.,
positive operating leverage) while a negative variance implies
expense growth exceeded revenue growth (i.e., negative
operating leverage).
Options – Contracts that grant the purchaser, for a premium
payment, the right, but not the obligation, to either purchase or
sell the associated financial instrument at a set price during a
specified period or at a specified date in the future.
Other real estate owned (OREO) and foreclosed assets –
Assets taken in settlement of troubled loans through surrender
or foreclosure. Foreclosed assets include all assets received in
full or partial satisfaction of a loan and include real and
personal property, equity interests in corporations,
partnerships, joint ventures, and beneficial interests in trusts.
Premises that are no longer used in operations may also be
included in other real estate owned.
Other-than-temporary impairment (OTTI) – When the fair
value of a security is less than its amortized cost basis, an
assessment is performed to determine whether the impairment
is other-than-temporary. If we intend to sell the security or
more likely than not will be required to sell the security before
recovery of its amortized cost basis less any current-period
credit loss, an other-than-temporary impairment is considered
to have occurred. In such cases, an other-than-temporary
impairment is recognized in earnings equal to the entire
difference between the investment’s amortized cost basis and
its fair value at the balance sheet date. Further, if we do not
expect to recover the entire amortized cost of the security, an
other-than-temporary impairment is considered to have
occurred. However for debt securities, if we do not intend to
sell the security and it is not more likely than not that we will
be required to sell the security before its recovery, the other-
than-temporary loss is separated into (a) the amount
representing the credit loss, and (b) the amount related to all
other factors. The other-than-temporary impairment related to
credit losses is recognized in earnings while the amount
related to all other factors is recognized in other
comprehensive income, net of tax.
Parent company liquidity coverage – Liquid assets divided by
funding obligations within a two year period.
Pretax earnings – Income from continuing operations before
income taxes and noncontrolling interests.
Pretax, pre-provision earnings from continuing operations –
Total revenue less noninterest expense, both from continuing
operations.
Primary client relationship – A corporate banking client
relationship with annual revenue generation of $10,000 to
$50,000 or more, and for Asset Management Group, a client
relationship with annual revenue generation of $10,000 or
more.
Probability of Default (PD) – An internal risk rating that
indicates the likelihood that a credit obligor will enter into
default status.
The PNC Financial Services Group, Inc. – Form 10-K 97