PNC Bank 2013 Annual Report Download - page 148

for all legally binding unfunded equity commitments. These
liabilities are reflected in Other liabilities on our Consolidated
Balance Sheet.
Table 60 also includes our involvement in lease financing
transactions with LLCs engaged in solar power generation that
to a large extent provided returns in the form of tax credits.
The outstanding financings and operating lease assets are
reflected as Loans and Other assets, respectively, on our
Consolidated Balance Sheet. Our lease financing liabilities are
reported in Deposits and Other liabilities.
During 2013, PNC sold limited partnership or non-managing
member interests previously held in certain consolidated
funds. As a result, PNC no longer met the consolidation
criteria for those investments and deconsolidated
approximately $675 million of net assets related to the funds.
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.
In the first quarter 2013, contractual provisions of a Non-
agency residential securitization were modified resulting in
PNC being deemed the primary beneficiary of the
securitization. As a result, we consolidated the SPE and
recorded the SPE’s home equity line of credit assets and
associated beneficial interest liabilities and are continuing to
account for these instruments at fair value. These balances are
included within the Credit Card and Other Securitization
Trusts balances line in Table 59. Additionally, creditors of the
SPE have no direct recourse to PNC.
Details about the Agency and Non-agency securitization SPEs
where we hold a variable interest and are not the primary
beneficiary are included in Table 60. 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.
N OTE 4L OANS AND C OMMITMENTS TO E XTEND
C REDIT
A summary of the major categories of loans outstanding
follows:
Table 61: Loans Summary
In millions
December 31
2013
December 31
2012
Commercial lending
Commercial $ 88,378 $ 83,040
Commercial real estate 21,191 18,655
Equipment lease financing 7,576 7,247
Total commercial lending 117,145 108,942
Consumer lending
Home equity 36,447 35,920
Residential real estate 15,065 15,240
Credit card 4,425 4,303
Other consumer 22,531 21,451
Total consumer lending 78,468 76,914
Total loans (a) (b) $195,613 $185,856
(a) Net of unearned income, net deferred loan fees, unamortized discounts and
premiums, and purchase discounts and premiums totaling $2.1 billion and $2.7
billion at December 31, 2013 and December 31, 2012, respectively.
(b) Future accretable yield related to purchased impaired loans is not included in the
loans summary.
In the normal course of business, we originate or purchase
loan products with contractual features, when concentrated,
that may increase our exposure as a holder of those loan
products. Possible product features that may create a
concentration of credit risk would include a high original or
updated LTV ratio, terms that may expose the borrower to
future increases in repayments above increases in market
interest rates, below-market interest rates and interest-only
loans, among others. We also originate home equity loans and
lines of credit that are concentrated in our primary geographic
markets.
We originate interest-only loans to commercial borrowers.
This is usually to match our borrowers’ asset conversion to
cash expectations (e.g., working capital lines, revolvers).
130 The PNC Financial Services Group, Inc. – Form 10-K