PNC Bank 2014 Annual Report Download - page 59

The increase in loans was driven by the increase in
commercial lending as a result of growth in commercial and
commercial real estate loans, primarily from new customers
and organic growth. The decline in consumer lending resulted
from lower home equity, education and residential mortgage
loans, partially offset by growth in automobile loans.
Loans represented 59% of total assets at December 31, 2014
and 61% at December 31, 2013. Commercial lending
represented 63% of the loan portfolio at December 31, 2014
and 60% at December 31, 2013. Consumer lending
represented 37% of the loan portfolio at December 31, 2014
and 40% at December 31, 2013.
Commercial real estate loans represented 11% of total loans at
both December 31, 2014 and December 31, 2013 and
represented 7% of total assets at both December 31, 2014 and
December 31, 2013. See the Credit Risk Management portion
of the Risk Management section of this Item 7 for additional
information regarding our loan portfolio.
Total loans above include purchased impaired loans of $4.9
billion, or 2% of total loans, at December 31, 2014, and $6.1
billion, or 3% of total loans, at December 31, 2013.
Our loan portfolio continued to be diversified among
numerous industries, types of businesses and consumers
across our principal geographic markets.
Allowance for Loan and Lease Losses (ALLL)
Our total ALLL of $3.3 billion at December 31, 2014
consisted of $1.6 billion and $1.7 billion established for the
commercial lending and consumer lending categories,
respectively. The ALLL included what we believe to be
appropriate loss coverage on all loans, including higher risk
loans, in the commercial and consumer portfolios. We do not
consider government insured or guaranteed loans to be higher
risk as defaults have historically been materially mitigated by
payments of insurance or guarantee amounts for approved
claims. Additional information regarding our higher risk loans
is included in the Credit Risk Management portion of the Risk
Management section of this Item 7 and Note 1 Accounting
Policies, Note 3 Asset Quality and Note 5 Allowances for
Loan and Lease Losses and Unfunded Loan Commitments and
Letters of Credit in our Notes To Consolidated Financial
Statements included in Item 8 of this Report.
Purchase Accounting Accretion and Valuation of
Purchased Impaired Loans
Information related to purchase accounting accretion and
accretable yield for 2014 and 2013 follows. Additional
information is provided in Note 4 Purchased Loans in the
Notes To Consolidated Financial Statements included in
Item 8 of this Report.
Table 8: Accretion – Purchased Impaired Loans
In millions 2014 2013
Accretion on purchased impaired loans
Scheduled accretion $ 460 $ 580
Reversal of contractual interest on impaired loans (253) (314)
Scheduled accretion net of contractual interest 207 266
Excess cash recoveries (a) 127 115
Total $ 334 $ 381
(a) Relates to excess cash recoveries for purchased impaired commercial loans.
Table 9: Purchased Impaired Loans – Accretable Yield
In millions 2014 2013
January 1 $2,055 $2,166
Scheduled accretion (460) (580)
Excess cash recoveries (127) (115)
Net reclassification to accretable from non-
accretable and other activity (a) 90 584
December 31 (b) $1,558 $2,055
(a) Approximately 93% and 37% of the net reclassifications for the years ended
December 31, 2014 and 2013, respectively, were driven by the commercial portfolio
and were due to improvements of cash expected to be collected on acquired loans in
future periods, with the remainder predominantly due to future cash flow changes in
the consumer portfolio.
(b) As of December 31, 2014, we estimate that the reversal of contractual interest on
purchased impaired loans will total approximately $.9 billion in future periods. This
will partially offset the total net accretable interest in future interest income of $1.6
billion on purchased impaired loans.
The PNC Financial Services Group, Inc. – Form 10-K 41