PNC Bank 2012 Annual Report Download - page 133

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.
Purchase accounting accretion – Accretion of the discounts
and premiums on acquired assets and liabilities. The purchase
accounting accretion is recognized in net interest income over
the weighted-average life of the financial instruments using
the constant effective yield method. Accretion for purchased
impaired loans includes any cash recoveries received in excess
of the recorded investment.
Purchased impaired loans – Acquired loans determined to be
credit impaired under FASB ASC 310-30 (AICPA SOP 03-3).
Loans are determined to be impaired if there is evidence of
credit deterioration since origination and for which it is
probable that all contractually required payments will not be
collected.
Recorded investment (purchased impaired loans) – The initial
investment of a purchased impaired loan plus interest
accretion and less any cash payments and writedowns to date.
The recorded investment excludes any valuation allowance
which is included in our allowance for loan and lease losses.
Recovery – Cash proceeds received on a loan that we had
previously charged off. We credit the amount received to the
allowance for loan and lease losses.
Residential development loans – Project-specific loans to
commercial customers for the construction or development of
residential real estate including land, single family homes,
condominiums and other residential properties.
Residential mortgage servicing rights hedge gains/(losses),
net – We have elected to measure acquired or originated
residential mortgage servicing rights (MSRs) at fair value
under GAAP. We employ a risk management strategy
designed to protect the economic value of MSRs from changes
in interest rates. This strategy utilizes securities and a portfolio
of derivative instruments to hedge changes in the fair value of
MSRs arising from changes in interest rates. These financial
instruments are expected to have changes in fair value which
are negatively correlated to the change in fair value of the
MSR portfolio. Net MSR hedge gains/(losses) represent the
change in the fair value of MSRs, exclusive of changes due to
time decay and payoffs, combined with the change in the fair
value of the associated securities and derivative instruments.
Return on average assets – Annualized net income divided by
average assets.
Return on average capital – Annualized net income divided by
average capital.
Return on average common shareholders’ equity – Annualized
net income attributable to common shareholders, divided by
average common shareholders’ equity.
Risk-weighted assets – Computed by the assignment of
specific risk-weights (as defined by the Board of Governors of
the Federal Reserve System) to assets and off-balance sheet
instruments.
Securitization – The process of legally transforming financial
assets into securities.
Servicing rights – An intangible asset or liability created by an
obligation to service assets for others. Typical servicing rights
include the right to receive a fee for collecting and forwarding
payments on loans and related taxes and insurance premiums
held in escrow.
Swaptions – Contracts that grant the purchaser, for a premium
payment, the right, but not the obligation, to enter into an
interest rate swap agreement during a specified period or at a
specified date in the future.
Taxable-equivalent interest – The interest income earned on
certain assets is completely or partially exempt from Federal
income tax. As such, these tax-exempt instruments typically
yield lower returns than taxable investments. To provide more
meaningful comparisons of yields and margins for all interest-
earning assets, we use interest income on a taxable-equivalent
basis in calculating average yields and net interest margins by
increasing the interest income earned on tax-exempt assets to
make it fully equivalent to interest income earned on other
taxable investments. This adjustment is not permitted under
GAAP on the Consolidated Income Statement.
Tier 1 common capital – Tier 1 risk-based capital, less
preferred equity, less trust preferred capital securities, and less
noncontrolling interests.
Tier 1 common capital ratio – Tier 1 common capital divided
by period-end risk-weighted assets.
114 The PNC Financial Services Group, Inc. – Form 10-K