PNC Bank 2011 Annual Report Download - page 145

The table below provides additional TDR information. The
Principal Forgiveness category includes principal forgiveness
and accrued interest forgiveness. These types of TDRs result
in a write down of the recorded investment and a charge-off if
such action has not already taken place. The Rate Reduction
TDRs category includes reduced interest rate and interest
deferral. The TDRs within this category would result in
reductions to future interest income. The Other TDR category
primarily includes postponement/reduction of scheduled
amortization, as well as contractual extensions.
In some cases, there have been multiple concessions granted
on one loan. When there have been multiple concessions
granted, the principal forgiveness TDR was prioritized for
purposes of determining the inclusion in the table below. For
example, if there is principal forgiveness in conjunction with
lower interest rate and postponement of amortization, the type
of concession will be reported as Principal Forgiveness.
Second in priority would be rate reduction. For example, if
there is an interest rate reduction in conjunction with
postponement of amortization, the type of concession will be
reported as a Rate Reduction.
TDRs by Type
Post-TDR Recorded Investment
During the year ended December 31, 2011
Dollars in millions
Principal
Forgiveness
Rate
Reduction Other Total
Commercial lending
Commercial $ 19 $ 33 $ 60 $ 112
Commercial real estate 83 123 54 260
TOTAL COMMERCIAL LENDING (a) 102 156 114 372
Consumer lending
Home equity 281 39 320
Residential real estate 236 115 351
Credit card 92 92
Other consumer 112 13
TOTAL CONSUMER LENDING 610 166 776
Total TDRs $102 $766 $280 $1,148
(a) Excludes less than $1 million of Equipment lease financing in Other TDRs.
After a loan is determined to be a TDR, we continue to track
its performance under its most recent restructured terms. In
the table below, we consider a TDR to have subsequently
defaulted when it becomes 60 days past due after the most
recent date the loan was restructured. The following table
presents the recorded investment of loans that were classified
as TDRs during a 12-month period within 2010 and 2011 and
subsequently defaulted during 2011.
TDRs which have Subsequently Defaulted
During the year ended December 31, 2011
Dollars in millions
Number of
Contracts
Recorded
Investment
Commercial lending
Commercial 37 $ 57
Commercial real estate 41 136
TOTAL COMMERCIAL LENDING (a) 78 193
Consumer lending
Home equity 1,166 90
Residential real estate 421 93
Credit card 38,256 28
Other consumer 47 1
TOTAL CONSUMER LENDING 39,890 212
Total TDRs 39,968 $405
(a) Amount for Equipment lease financing totaled less than $1 million.
The impact to the ALLL for commercial loan TDRs is the effect
of moving to the specific reserve methodology from the
quantitative reserve methodology for those loans that were not
already put on nonaccrual status. There is an impact to the
ALLL as a result of the concession made, which generally
results in the expectation of fewer future cash flows. The
decline in expected cash flows, as well as the application of a
present value discount rate, when compared to the recorded
investment, results in a charge-off or increased ALLL.
Subsequent defaults of commercial loan TDRs do not have a
significant impact on the ALLL as these TDRs are individually
evaluated under the specific reserve methodology.
For consumer TDRs the ALLL is calculated using a
discounted cash flow model, which leverages subsequent
default, prepayment, and severity rate assumptions based upon
historically observed data. Similar to the commercial loan
specific reserve methodology, the reduced expected cash
flows resulting from the concessions granted impact the
consumer ALLL. The decline in expected cash flows, as well
as the application of a present value discount rate, when
compared to the recorded investment, results in a charge-off
or increased ALLL.
136 The PNC Financial Services Group, Inc. – Form 10-K