PNC Bank 2012 Annual Report Download - page 132

Intrinsic value – The difference between the price, if any,
required to be paid for stock issued pursuant to an equity
compensation arrangement and the fair market value of the
underlying stock.
Investment securities – Collectively, securities available for
sale and securities held to maturity.
Leverage ratio – Tier 1 risk-based capital divided by adjusted
average total assets.
LIBOR – Acronym for London InterBank Offered Rate.
LIBOR is the average interest rate charged when banks in the
London wholesale money market (or interbank market)
borrow unsecured funds from each other. LIBOR rates are
used as a benchmark for interest rates on a global basis.
PNC’s product set includes loans priced using LIBOR as a
benchmark.
Loan-to-value ratio (LTV) – A calculation of a loan’s
collateral coverage that is used both in underwriting and
assessing credit risk in our lending portfolio. LTV is the sum
total of loan obligations secured by collateral divided by the
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 loss, net 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
nonperforming loans and OREO and foreclosed assets, but
exclude certain government insured or guaranteed loans, loans
held for sale, loans accounted for under fair value option and
purchased impaired loans. 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, home equity, residential real estate, credit card and
other consumer customers as well as TDRs which have not
returned to performing status. Nonperforming loans exclude
certain government insured or guaranteed loans, loans held for
sale, loans accounted for under the fair value option and
purchased impaired loans. Nonperforming loans exclude
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 primarily through deed-in-
lieu of foreclosure or foreclosure. Foreclosed assets include real
and personal property, equity interests in corporations,
partnerships, and limited liability companies.
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.
The PNC Financial Services Group, Inc. – Form 10-K 113