PNC Bank 2012 Annual Report Download - page 163

For tax credit investments in which we do not have the right to
make decisions that will most significantly impact the
economic performance of the entity, we are not the primary
beneficiary and thus they are not consolidated. These
investments are disclosed in the Non-Consolidated VIEs table.
The table also reflects our maximum exposure to loss. Our
maximum exposure to loss is equal to our legally binding
equity commitments adjusted for recorded impairment and
partnership results. We use the equity method to account for
our investment in these entities with the investments reflected
in Equity investments on our Consolidated Balance Sheet. In
addition, we increase our recognized investments and
recognize a liability for all legally binding unfunded equity
commitments. These liabilities are reflected in Other liabilities
on our Consolidated Balance Sheet.
R ESIDENTIAL AND C OMMERCIAL M ORTGAGE -B ACKED
S ECURITIZATIONS
In connection with each Agency and Non-agency
securitization discussed above, we evaluate each SPE utilized
in these transactions for consolidation. In performing these
assessments, we evaluate our level of continuing involvement
in these transactions as the nature of our involvement
ultimately determines whether or not we hold a variable
interest and/or are the primary beneficiary of the SPE. Factors
we consider in our consolidation assessment include the
significance of (i) our role as servicer, (ii) our holdings of
mortgage-backed securities issued by the securitization SPE,
and (iii) the rights of third-party variable interest holders.
The first step in our assessment is to determine whether we
hold a variable interest in the securitization SPE. We hold
variable interests in Agency and Non-agency securitization
SPEs through our holding of mortgage-backed securities
issued by the SPEs and/or our recourse obligations. Each SPE
in which we hold a variable interest is evaluated to determine
whether we are the primary beneficiary of the entity. For
Agency securitization transactions, our contractual role as
servicer does not give us the power to direct the activities that
most significantly affect the economic performance of the
SPEs. Thus, we are not the primary beneficiary of these
entities. For Non-agency securitization transactions, we would
be the primary beneficiary to the extent our servicing activities
give us the power to direct the activities that most
significantly affect the economic performance of the SPE and
we hold a more than insignificant variable interest in the
entity. At December 31, 2012, our level of continuing
involvement in Non-agency securitization SPEs did not result
in PNC being deemed the primary beneficiary of any of these
entities. Details about the Agency and Non-agency
securitization SPEs where we hold a variable interest and are
not the primary beneficiary are included in the Non-
Consolidated VIEs table. Our maximum exposure to loss as a
result of our involvement with these SPEs is the carrying
value of the mortgage-backed securities, servicing assets,
servicing advances, and our liabilities associated with our
recourse obligations. Creditors of the securitization SPEs have
no recourse to PNC’s assets or general credit.
144 The PNC Financial Services Group, Inc. – Form 10-K