PNC Bank 2014 Annual Report Download - page 184

Quantitative information about the significant unobservable inputs within Level 3 nonrecurring assets follows.
Table 87: Fair Value Measurements – Nonrecurring Quantitative Information
Level 3 Instruments Only
Dollars in millions Fair Value Valuation Techniques Unobservable Inputs Range (Weighted Average)
December 31, 2014
Assets
Nonaccrual loans (a) $ 29 LGD percentage (b) Loss severity 2.9%-68.5% (42.1%)
Equity investments 17 Discounted cash flow Market rate of return 6.0%
Other (c) 215 Fair value of property or collateral Appraised value/sales price Not meaningful
Total Assets $ 261
December 31, 2013
Assets
Nonaccrual loans (a) $ 21 LGD percentage (b) Loss severity 7.0%-84.9% (36.6%)
Loans held for sale (d) 224 Discounted cash flow Spread over the benchmark curve (e)
Estimated servicing cash flows
35bps-220bps (144bps)
.8%-3.5% (2.0%)
Equity investments 6 Discounted cash flow Market rate of return 6.5%
Commercial mortgage
servicing rights (f)
543 Discounted cash flow Constant prepayment rate (CPR)
Discount rate
7.1%-11.8% (7.7%)
5.4%-7.6% (6.7%)
Other (c) 246 Fair value of property or collateral Appraised value/sales price Not meaningful
Total Assets $1,040
(a) The fair value of nonaccrual loans included in this line item is determined based on internal loss rates. The fair value of nonaccrual loans where the fair value is determined based on
the appraised value or sales price is included within Other, below.
(b) LGD percentage represents the amount that PNC expects to lose in the event a borrower defaults on an obligation.
(c) Other included Nonaccrual loans of $25 million, OREO and foreclosed assets of $168 million and Long-lived assets held for sale of $22 million as of December 31, 2014.
Comparably, as of December 31, 2013, Other included Nonaccrual loans of $14 million, OREO and foreclosed assets of $181 million and Long-lived assets held for sale of $51
million. The fair value of these assets is determined based on appraised value or sales price, the range of which is not meaningful to disclose.
(d) As of September 1, 2014, PNC elected to account for agency loans held for sale at fair value. Accordingly, beginning on September 1, 2014, all new commercial mortgage loans held
for sale originated for sale to the agencies are measured at fair value on a recurring basis.
(e) The assumed yield spread over benchmark curve for each instrument is generally intended to incorporate non-interest-rate risks such as credit and liquidity risks.
(f) As of January 1, 2014, PNC made an irrevocable election to subsequently measure all classes of commercial MSRs at fair value. Accordingly, beginning with the first quarter of 2014,
commercial MSRs are measured at fair value on a recurring basis.
166 The PNC Financial Services Group, Inc. – Form 10-K