PNC Bank 2012 Annual Report Download - page 179

Activity for the accretable yield for 2012 follows:
Table 76: Purchased Impaired Loans – Accretable Yield (a)
In millions 2012
January 1 $2,109
Addition of accretable yield due to RBC Bank (USA)
acquisition on March 2, 2012 587
Accretion (including excess cash recoveries) (828)
Net reclassifications to accretable from non-accretable (b) 327
Disposals (29)
December 31 $2,166
(a) The table above has been updated to reflect certain immaterial adjustments.
(b) Over eighty-five percent of the net reclassifications were driven by the commercial
portfolio. Over half of the commercial portfolio impact related to excess cash
recoveries recognized during the period, with the remaining due to improvements of
cash expected to be collected on both RBC Bank (USA) and National City loans in
future periods. The remaining net reclassifications were due to future cash flow
changes in the consumer portfolio.
RBC B
ANK (USA) A CQUISITION
Loans acquired as part of the RBC Bank (USA) acquisition on
March 2, 2012 had an outstanding balance of $16.7 billion. At
purchase, acquired loans were recorded at fair value. No
separate valuation allowance was carried over and no
allowance was created at acquisition. Fair values were
determined by discounting both principal and interest cash
flows expected to be collected using a market discount rate for
similar instruments with adjustments that management
believes a market participant would consider in determining
fair value. Cash flows expected to be collected as of the
acquisition date were estimated using internal models and
third party data that incorporate management’s best estimate
of key assumptions, such as default rates, loss severity,
prepayment speeds, and timing of disposition upon default. In
addition, each loan was reviewed to determine if it should be
classified as a purchased impaired loan accounted for under
ASC 310-30. Loans with evidence of credit quality
deterioration since origination and for which it was probable
at purchase that PNC will be unable to collect all contractually
required payments were considered purchased impaired.
Several factors were considered when evaluating whether a
loan was considered a purchased impaired loan, including the
delinquency status of the loan, updated borrower credit status,
geographic information, and updated loan-to-values (LTV). In
accordance with ASC 310-30, excluded from the purchased
impaired loans were leases, revolving credit arrangements and
loans held for sale.
As of March 2, 2012, loans were classified as purchased
impaired or purchased non-impaired and had a fair value of
$2.0 billion and $12.5 billion, respectively, and an outstanding
balance of $3.0 billion and $13.7 billion, respectively.
Table 77: RBC Bank (USA) Acquisition – Purchased Loans
Balances (a)
Purchased Impaired Loans Other Purchased Loans
As of March 2, 2012
In millions Fair Value
Outstanding
Balance Fair Value
Outstanding
Balance
Commercial Lending
Commercial $ 330 $ 564 $ 5,954 $ 6,298
Commercial real
estate 597 1,018 2,101 2,340
Equipment lease
financing 86 92
Total Commercial
Lending 927 1,582 8,141 8,730
Consumer Lending
Home equity 175 215 2,827 3,346
Residential real
estate 896 1,214 1,168 1,202
Credit card and
other consumer 376 385
Total Consumer
Lending 1,071 1,429 4,371 4,933
Total $1,998 $3,011 $12,512 $13,663
(a) The table above has been updated to reflect certain immaterial adjustments and
reclassifications between commercial and commercial real estate.
The table below details the contractually required payments,
non-accretable difference, accretable yield, and fair value for
purchased impaired loans acquired in the RBC Bank (USA)
acquisition as of March 2, 2012.
Table 78: Purchased Impaired Loans – RBC Bank (USA)
Acquisition(a)
In millions
March 2,
2012
Contractually required payments including interest $3,769
Less: Nonaccretable difference 1,184
Cash flows expected to be collected 2,585
Less: Accretable yield 587
Fair value of loans acquired $1,998
(a) The table above has been updated to reflect certain immaterial adjustments.
160 The PNC Financial Services Group, Inc. – Form 10-K