PNC Bank 2012 Annual Report Download - page 251

N OTE 26 S EGMENT R EPORTING
We have six reportable business segments:
• Retail Banking
• Corporate & Institutional Banking
• Asset Management Group
• Residential Mortgage Banking
• BlackRock
• Non-Strategic Assets Portfolio
Results of individual businesses are presented based on our
internal management reporting practices. There is no
comprehensive, authoritative body of guidance for
management accounting equivalent to GAAP; therefore, the
financial results of our individual businesses are not
necessarily comparable with similar information for any other
company. We periodically refine our internal methodologies
as management reporting practices are enhanced. To the
extent practicable, retrospective application of new
methodologies is made to prior period reportable business
segment results and disclosures to create comparability to the
current period presentation to reflect any such refinements.
Financial results are presented, to the extent practicable, as if
each business operated on a stand-alone basis. Additionally,
we have aggregated the results for corporate support functions
within “Other” for financial reporting purposes.
Assets receive a funding charge and liabilities and capital
receive a funding credit based on a transfer pricing
methodology that incorporates product maturities, duration
and other factors. During the second quarter of 2012,
enhancements were made to the funds transfer pricing
methodology. Retrospective application of our new funds
transfer pricing methodology has been made to the prior
period reportable business segment results and disclosures to
create comparability to the current period presentation, which
we believe is more meaningful to readers of our financial
statements.
A portion of capital is intended to cover unexpected losses and
is assigned to our business segments using our risk-based
economic capital model, including consideration of the
goodwill and other intangible assets at those business
segments, as well as the diversification of risk among the
business segments.
We have allocated the allowances for loan and lease losses
and for unfunded loan commitments and letters of credit based
on our assessment of risk in each business segment’s loan
portfolio. Our allocation of the costs incurred by operations
and other shared support areas not directly aligned with the
businesses is primarily based on the use of services. Key
reserve assumptions and estimation processes react to and are
influenced by observed changes in loan portfolio performance
experience, the financial strength of the borrower, and
economic conditions. Key reserve assumptions are
periodically updated. During the third quarter of 2012, PNC
increased the amount of internally observed data used in
estimating the key commercial lending assumptions of PDs
and LGDs. Prior periods are not presented on a comparable
basis as it is not practicable to do so.
Total business segment financial results differ from
consolidated income from continuing operations before
noncontrolling interests, which itself excludes the earnings
and revenue attributable to GIS through June 30, 2010 and the
related third quarter 2010 after-tax gain on the sale of GIS that
are reflected in discontinued operations. The impact of these
differences is reflected in the “Other” category in the business
segment tables. “Other” includes residual activities that do not
meet the criteria for disclosure as a separate reportable
business, such as gains or losses related to BlackRock
transactions, integration costs, asset and liability management
activities including net securities gains or losses, other-than-
temporary impairment of investment securities and certain
trading activities, exited businesses, alternative investments
including private equity, intercompany eliminations, most
corporate overhead, tax adjustments that are not allocated to
business segments and differences between business segment
performance reporting and financial statement reporting
(GAAP), including the presentation of net income attributable
to noncontrolling interests as the segments’ results exclude
their portion of net income attributable to noncontrolling
interests. Assets, revenue and earnings attributable to foreign
activities were not material in the periods presented for
comparative purposes.
B USINESS S EGMENT P RODUCTS AND S ERVICES
Retail Banking provides deposit, lending, brokerage,
investment management, and cash management services to
consumer and small business customers within our primary
geographic markets. Our customers are serviced through our
branch network, call centers, online banking and mobile
channels. The branch network is located primarily in
Pennsylvania, Ohio, New Jersey, Michigan, Illinois,
Maryland, Indiana, North Carolina, Florida, Kentucky,
Washington, D.C., Delaware, Alabama, Virginia, Georgia,
Missouri, Wisconsin and South Carolina.
Corporate & Institutional Banking provides lending, treasury
management and capital markets-related products and services
to mid-sized corporations, government and not-for-profit
entities and selectively to large corporations. Lending
products include secured and unsecured loans, letters of credit
and equipment leases. Treasury management services include
cash and investment management, receivables management,
disbursement services, funds transfer services, information
reporting and global trade services. Capital markets-related
products and services include foreign exchange, derivatives,
loan syndications, mergers and acquisitions advisory and
related services to middle-market companies, our multi-seller
conduit, securities underwriting and securities sales and
trading. Corporate & Institutional Banking also provides
commercial loan servicing, and real estate advisory and
232 The PNC Financial Services Group, Inc. – Form 10-K