PNC Bank 2014 Annual Report Download - page 179

An instrument’s categorization within the hierarchy is based
on the lowest level of input that is significant to the fair value
measurement. Changes from one quarter to the next related to
the observability of inputs to a fair value measurement may
result in a reclassification (transfer) of assets or liabilities
between hierarchy levels. PNC’s policy is to recognize
transfers in and transfers out as of the end of the reporting
period.
During 2014, there were transfers of one available for sale
residential mortgage-backed non-agency security and one debt
trading security of $77 million and $29 million, respectively,
from Level 2 to Level 3 due to valuation inputs that were
deemed to be unobservable. Additionally, there were transfers
of available for sale state and municipal securities from Level
3 to Level 2 of $14 million due to an increase in valuation
inputs that were deemed to be observable. Also during 2014,
there were transfers of residential mortgage loans held for sale
from Level 2 to Level 3 of $11 million as a result of reduced
marketability in the secondary residential mortgage sales
market which reduced the observability of valuation inputs. In
addition, there were also transfers out of Level 3 residential
mortgage loans held for sale and loans of $5 million and $105
million, respectively, primarily due to the transfer of
residential mortgage loans held for sale and loans to OREO.
Finally, there was approximately $20 million of Level 3
residential mortgage loans held for sale reclassified to Level 3
loans during 2014 due to the loans being reclassified from
held for sale loans to held in portfolio loans. This amount was
included in Transfers out of Level 3 residential mortgages
loans held for sale and Transfers into Level 3 loans within
Table 84.
During 2013, there were transfers of residential mortgage
loans held for sale and loans from Level 2 to Level 3 of $13
million and $29 million, respectively, as a result of reduced
marketability in the secondary residential mortgage sales
market which reduced the observability of valuation inputs. In
addition, there were transfers of residential mortgage loans of
$164 million that were reclassified from Level 2 to Level 3
due to the unobservable nature of the pool level pricing
methodology. Also during 2013, there were transfers out of
Level 3 residential mortgage loans held for sale and loans of
$12 million and $28 million, respectively, primarily due to the
transfer of residential mortgage loans held for sale and loans
to OREO. In addition, there was approximately $84 million of
Level 3 residential mortgage loans held for sale reclassified to
Level 3 loans during 2013 due to the loans being reclassified
from held for sale loans to held in portfolio loans. This
amount was included in Transfers out of Level 3 residential
mortgage loans held for sale and Transfers into Level 3 loans
within Table 84. Furthermore, there were transfers of $15
million into Level 3 loans and other borrowed funds reflecting
the correction to include transferred loans over which PNC
regained effective control and the related liabilities recorded
pursuant to ASC 860.
The PNC Financial Services Group, Inc. – Form 10-K 161