PNC Bank 2013 Annual Report Download - page 60

P URCHASED I MPAIRED L OANS –A CCRETABLE D IFFERENCE
S ENSITIVITY A NALYSIS
The following table provides a sensitivity analysis on the
Purchased Impaired Loans portfolio. The analysis reflects
hypothetical changes in key drivers for expected cash flows
over the life of the loans under declining and improving
conditions at a point in time. Any unusual significant
economic events or changes, as well as other variables not
considered below (e.g., natural or widespread disasters), could
result in impacts outside of the ranges represented below.
Additionally, commercial and commercial real estate loan
settlements or sales proceeds can vary widely from appraised
values due to a number of factors including, but not limited to,
special use considerations, liquidity premiums and
improvements/deterioration in other income sources.
Table 12: Accretable Difference Sensitivity – Total
Purchased Impaired Loans
In billions
December 31,
2013
Declining
Scenario (a)
Improving
Scenario (b)
Expected Cash Flows $ 7.2 $(.2) $.3
Accretable Difference 2.1 (.1) .1
Allowance for Loan and
Lease Losses (1.0) (.2) .3
(a) Declining Scenario – Reflects hypothetical changes that would decrease future cash
flow expectations. For consumer loans, we assume home price forecast decreases by
ten percent and unemployment rate forecast increases by two percentage points; for
commercial loans, we assume that collateral values decrease by ten percent.
(b) Improving Scenario – Reflects hypothetical changes that would increase future cash
flow expectations. For consumer loans, we assume home price forecast increases by
ten percent, unemployment rate forecast decreases by two percentage points and
interest rate forecast increases by two percentage points; for commercial loans, we
assume that collateral values increase by ten percent.
The present value impact of declining cash flows is primarily
reflected as immediate impairment charge to the provision for
credit losses, resulting in an increase to the allowance for loan
and lease losses. The present value impact of increased cash
flows is first recognized as a reversal of the allowance with
any additional cash flow increases reflected as an increase in
accretable yield over the life of the loan.
N
ET U NFUNDED C REDIT C OMMITMENTS
Net unfunded credit commitments are comprised of the
following:
Table 13: Net Unfunded Credit Commitments
In millions
December 31
2013
December 31
2012
Total commercial lending (a) $ 90,104 $ 78,703
Home equity lines of credit 18,754 19,814
Credit card 16,746 17,381
Other 4,266 4,694
Total $129,870 $120,592
(a) Less than 5% of net unfunded credit commitments relate to commercial real estate at
each date.
Commitments to extend credit represent arrangements to lend
funds or provide liquidity subject to specified contractual
conditions. Commercial commitments reported above exclude
syndications, assignments and participations, primarily to
financial institutions, totaling $25.0 billion at December 31,
2013 and $22.5 billion at December 31, 2012.
Unfunded liquidity facility commitments and standby bond
purchase agreements totaled $1.3 billion at December 31,
2013 and $1.4 billion at December 31, 2012 and are included
in the preceding table, primarily within the Total commercial
lending category.
In addition to the credit commitments set forth in the table
above, our net outstanding standby letters of credit totaled
$10.5 billion at December 31, 2013 and $11.5 billion at
December 31, 2012. Standby letters of credit commit us to
make payments on behalf of our customers if specified future
events occur.
Information regarding our Allowance for unfunded loan
commitments and letters of credit is included in Note 7
Allowance for Loan and Lease Losses and Unfunded Loan
Commitments and Letters of Credit in the Notes To
Consolidated Financial Statements in Item 8 of this Report.
42 The PNC Financial Services Group, Inc. – Form 10-K