Investment Securities

9 Months Ended

Sep. 30, 2012

Investment Securities Disclosure [Abstract]

Note 8 Investment Securities

Table 83: Investment Securities Summary

			Amortized		Unrealized						Fair
In millions			Cost		Gains			Losses			Value
September 30, 2012

Securities Available for Sale
Debt securities
	US Treasury and government agencies		$	2,773		$	251			$	3,024
	Residential mortgage-backed
		Agency		26,850			1,087	$	(7)		27,930
		Non-agency		6,313			308		(401)		6,220
	Commercial mortgage-backed
		Agency		616			35				651
		Non-agency		3,088			195		(2)		3,281
	Asset-backed			5,588			49		(98)		5,539
	State and municipal			1,970			114		(35)		2,049
	Other debt			3,015			108		(5)		3,118
		Total debt securities		50,213			2,147		(548)		51,812
Corporate stocks and other				321							321
	Total securities available for sale		$	50,534		$	2,147	$	(548)	$	52,133
Securities Held to Maturity
Debt securities
	US Treasury and government agencies		$	228		$	50			$	278
	Residential mortgage-backed (agency)			4,578			222				4,800
	Commercial mortgage-backed
		Agency		1,292			88				1,380
		Non-agency		2,784			109				2,893
	Asset-backed			772			5	$	(2)		775
	State and municipal			671			58				729
	Other debt			356			21				377
	Total securities held to maturity		$	10,681		$	553	$	(2)	$	11,232

December 31, 2011

Securities Available for Sale
Debt securities
	US Treasury and government agencies		$	3,369		$	348			$	3,717
	Residential mortgage-backed
		Agency		26,081			772	$	(61)		26,792
		Non-agency		6,673			152		(1,268)		5,557
	Commercial mortgage-backed
		Agency		1,101			39				1,140
		Non-agency		2,693			80		(17)		2,756
	Asset-backed			3,854			31		(216)		3,669
	State and municipal			1,779			75		(47)		1,807
	Other debt			2,691			83		(12)		2,762
		Total debt securities		48,241			1,580		(1,621)		48,200
Corporate stocks and other				368							368
	Total securities available for sale		$	48,609		$	1,580	$	(1,621)	$	48,568
Securities Held to Maturity
Debt securities
	US Treasury and government agencies		$	221		$	40			$	261
	Residential mortgage-backed (agency)			4,761			131	$	(1)		4,891
	Commercial mortgage-backed
		Agency		1,332			50				1,382
		Non-agency		3,467			108		(2)		3,573
	Asset-backed			1,251			14		(3)		1,262
	State and municipal			671			31				702
	Other debt			363			16				379
	Total securities held to maturity		$	12,066		$	390	$	(6)	$	12,450

The fair value of investment securities is impacted by interest rates, credit spreads, market volatility and liquidity conditions. Net unrealized gains and losses in the securities available for sale portfolio are included in shareholders' equity as accumulated other comprehensive income or loss, net of tax, unless credit-related. Securities held to maturity are carried at amortized cost. At September 30, 2012, accumulated other comprehensive income included pretax gains of $91 million from derivatives used to hedge the purchase of investment securities classified as held to maturity. The gains will be accreted into interest income as an adjustment of yield on the securities.

The gross unrealized loss on debt securities held to maturity was $2 million at September 30, 2012 and $6 million at December 31, 2011, with $.2 billion and $.5 billion of positions in a continuous loss position for less than 12 months at September 30, 2012 and December 31, 2011, respectively. The fair value on debt securities held to maturity that were in a continuous loss position for 12 months or more was $.1 billion at September 30, 2012 and not significant at December 31, 2011.

The following table presents gross unrealized loss and fair value of securities available for sale at September 30, 2012 and December 31, 2011. The securities are segregated between investments that have been in a continuous unrealized loss position for less than twelve months and twelve months or more based on the point in time the fair value declined below the amortized cost basis. The table includes debt securities where a portion of other-than-temporary impairment (OTTI) has been recognized in accumulated other comprehensive income (loss).

Table 84: Gross Unrealized Loss and Fair Value of Securities Available for Sale

				Unrealized loss position less					Unrealized loss position 12
In millions				than 12 months					months or more				Total
				Unrealized			Fair		Unrealized		Fair		Unrealized		Fair
				Loss			Value		Loss		Value		Loss		Value
September 30, 2012
Debt securities
	Residential mortgage-backed
		Agency			$	(4)	$	652	$	(3)	$	134	$	(7)	$	786
		Non-agency				(3)		58		(398)		3,878		(401)		3,936
	Commercial mortgage-backed
		Non-agency				(1)		88		(1)		28		(2)		116
	Asset-backed					(3)		676		(95)		757		(98)		1,433
	State and municipal					(1)		142		(34)		564		(35)		706
	Other debt					(3)		79		(2)		13		(5)		92
			Total		$	(15)	$	1,695	$	(533)	$	5,374	$	(548)	$	7,069

December 31, 2011
Debt securities
	Residential mortgage-backed
		Agency			$	(24)	$	2,165	$	(37)	$	408	$	(61)	$	2,573
		Non-agency				(26)		273		(1,242)		4,378		(1,268)		4,651
	Commercial mortgage-backed
		Non-agency				(17)		483						(17)		483
	Asset-backed					(13)		1,355		(203)		764		(216)		2,119
	State and municipal					(6)		512		(41)		318		(47)		830
	Other debt					(5)		240		(7)		289		(12)		529
			Total		$	(91)	$	5,028	$	(1,530)	$	6,157	$	(1,621)	$	11,185

Evaluating Investment Securities for Other-than-Temporary Impairments

For the securities in the preceding table, as of September 30, 2012 we do not intend to sell and believe we will not be required to sell the securities prior to recovery of the amortized cost basis.

On at least a quarterly basis, we conduct a comprehensive security-level assessment on all securities in an unrealized loss position to determine if OTTI exists. An unrealized loss exists when the current fair value of an individual security is less than its amortized cost basis. An OTTI loss must be recognized for a debt security in an unrealized loss position if we intend to sell the security or it is more likely than not we will be required to sell the security prior to recovery of its amortized cost basis. In this situation, the amount of loss recognized in income is equal to the difference between the fair value and the amortized cost basis of the security. Even if we do not expect to sell the security, we must evaluate the expected cash flows to be received to determine if we believe a credit loss has occurred. In the event of a credit loss, only the amount of impairment associated with the credit loss is recognized in income. The portion of the unrealized loss relating to other factors, such as liquidity conditions in the market or changes in market interest rates, is recorded in accumulated other comprehensive income (loss).

The security-level assessment is performed on each security, regardless of the classification of the security as available for sale or held to maturity. Our assessment considers the security structure, recent security collateral performance metrics if applicable, external credit ratings, failure of the issuer to make scheduled interest or principal payments, our judgment and expectations of future performance, and relevant independent industry research, analysis and forecasts. Results of the periodic assessment are reviewed by a cross-functional senior management team representing Asset & Liability Management, Finance, and Market Risk Management. The senior management team considers the results of the assessments, as well as other factors, in determining whether the impairment is other-than-temporary.

For debt securities, a critical component of the evaluation for OTTI is the identification of credit-impaired securities, where management does not expect to receive cash flows sufficient to recover the entire amortized cost basis of the security. The paragraphs below describe our process for identifying credit impairment for our most significant categories of securities not backed by the US government or its agencies.

Non-Agency Residential Mortgage-Backed Securities and Asset-Backed Securities Collateralized by First-Lien and Second-Lien Non-Agency Residential Mortgage Loans

Potential credit losses on these securities are evaluated on a security by security basis. Collateral performance assumptions are developed for each security after reviewing collateral composition and collateral performance statistics. This includes analyzing recent delinquency roll rates, loss severities, voluntary prepayments, and various other collateral and performance metrics. This information is then combined with general expectations on the housing market, employment, and other economic factors to develop estimates of future performance.

Security level assumptions for prepayments, loan defaults, and loss given default are applied to every security using a third-party cash flow model. The third-party cash flow model then generates projected cash flows according to the structure of each security. Based on the results of the cash flow analysis, we determine whether we will recover the amortized cost basis of our security.

The following table provides detail on the significant assumptions used to determine credit impairment for non-agency residential mortgage-backed and asset-backed securities collateralized by first-lien and second-lien non-agency residential mortgage loans.

Table 85: Credit Impairment Assessment Assumptions - Non-Agency Residential Mortgage-Backed and Asset-Backed Securities (a)

								Weighted-
September 30, 2012			Range					average (b)
Long-term prepayment rate (annual CPR)
	Prime			7	-	20	%	14	%
	Alt-A			5	-	12		6
	Option ARM			3	-	6		3
Remaining collateral expected to default
	Prime			0	-	51	%	20	%
	Alt-A			3	-	60		33
	Option ARM			15	-	77		53
Loss severity
	Prime			25	-	80	%	48	%
	Alt-A			30	-	90		60
	Option ARM			40	-	70		61
(a)		Collateralized by first-lien and second-lien non-agency residential mortgage loans.
(b)		Calculated by weighting the relevant assumption for each individual security by the current outstanding cost basis of the security.

Non-Agency Commercial Mortgage-Backed Securities

Credit losses on these securities are measured using property-level cash flow projections and forward-looking property valuations. Cash flows are projected using a detailed analysis of net operating income (NOI) by property type which, in turn, is based on the analysis of NOI performance over the past several business cycles combined with PNC's economic outlook for the current cycle. Loss severities are based on property price projections, which are calculated using capitalization rate projections. The capitalization rate projections are based on a combination of historical capitalization rates and expected capitalization rates implied by current market activity, our outlook and relevant independent industry research, analysis and forecasts. Securities exhibiting weaker performance within the model are subject to further analysis. This analysis is performed at the loan level, and includes assessing local market conditions, reserves, occupancy, rent rolls and master/special servicer details.

During the third quarter and first nine months of 2012 and 2011, the OTTI credit losses recognized in noninterest income related to estimated credit losses on securities that we do not expect to sell were as follows:

Table 86: Summary of OTTI Credit Losses Recognized in Earnings

		Three months ended September 30					Nine months ended September 30
In millions		2012			2011			2012		2011
Available for sale securities:
	Non-agency residential mortgage-backed		$	(23)	$	(30)		$	(86)	$	(93)
	Asset-backed			(1)		(5)			(9)		(14)
	Other debt								(1)		(1)
Total			$	(24)	$	(35)		$	(96)	$	(108)

Table 87: Summary of OTTI Noncredit (Losses) Recoveries Included in Accumulated Other Comprehensive Income (Loss)

	Three months ended September 30					Nine months ended September 30
In millions	2012			2011			2012		2011
Total		$	(2)	$	(87)		$	22	$	(117)

The following table presents a rollforward of the cumulative OTTI credit losses recognized in earnings for all debt securities for which a portion of an OTTI loss was recognized in accumulated other comprehensive loss

Table 88: Rollforward of Cumulative OTTI Credit Losses Recognized in Earnings

		Non-agency			Non-agency
		residential			commercial
In millions		mortgage-backed			mortgage-backed			Asset-backed			Other debt			Total
For the three months ended September 30, 2012
June 30, 2012			$	(890)		$	(6)		$	(252)		$	(14)	$	(1,162)
Loss where impairment was not previously recognized				(6)											(6)
Additional loss where credit impairment was
	previously recognized			(17)						(1)					(18)
September 30, 2012			$	(913)		$	(6)		$	(253)		$	(14)	$	(1,186)

		Non-agency			Non-agency
		residential			commercial
In millions		mortgage-backed			mortgage-backed			Asset-backed			Other debt			Total
For the three months ended September 30, 2011
June 30, 2011			$	(761)		$	(6)		$	(232)		$	(13)	$	(1,012)
Loss where impairment was not previously recognized				(2)											(2)
Additional loss where credit impairment was
	previously recognized			(28)						(5)					(33)
September 30, 2011			$	(791)		$	(6)		$	(237)		$	(13)	$	(1,047)

	Non-agency			Non-agency
	residential			commercial
In millions	mortgage-backed			mortgage-backed			Asset-backed			Other debt			Total
For the nine months ended September 30, 2012
December 31, 2011		$	(828)		$	(6)		$	(244)		$	(13)	$	(1,091)
Loss where impairment was not previously recognized			(8)									(1)		(9)
Additional loss where credit impairment was previously recognized			(78)						(9)					(87)
Reduction due to credit impaired securities sold			1											1
September 30, 2012		$	(913)		$	(6)		$	(253)		$	(14)	$	(1,186)

	Non-agency			Non-agency
	residential			commercial
In millions	mortgage-backed			mortgage-backed			Asset-backed			Other debt			Total
For the nine months ended September 30, 2011
December 31, 2010		$	(709)		$	(11)		$	(223)		$	(12)	$	(955)
Loss where impairment was not previously recognized			(5)						(3)			(1)		(9)
Additional loss where credit impairment was previously recognized			(88)						(11)					(99)
Reduction due to credit impaired securities sold			11			5								16
September 30, 2011		$	(791)		$	(6)		$	(237)		$	(13)	$	(1,047)

Information relating to gross realized securities gains and losses from the sales of securities is set forth in the following table.

Table 89: Gains (Losses) on Sales of Securities Available for Sale

			Gross		Gross		Net		Tax
In millions	Proceeds		Gains		Losses		Gains		Expense
For the nine months ended September 30
2012	$	8,553	$	169	$	(10)	$	159	$	56
2011		17,564		336		(149)		187		66

The following table presents, by remaining contractual maturity, the amortized cost, fair value and weighted-average yield of debt securities at September 30, 2012.

Table 90: Contractual Maturity of Debt Securities

September 30, 2012					After 1 Year			After 5 Years			After 10
Dollars in millions		1 Year or Less			through 5 Years			through 10 Years			Years			Total
Securities Available for Sale
US Treasury and government agencies		$	2		$	957		$	1,362		$	452		$	2,773
Residential mortgage-backed
	Agency					13			705			26,132			26,850
	Non-agency					2			19			6,292			6,313
Commercial mortgage-backed
	Agency		1			563			52						616
	Non-agency		2			174			58			2,854			3,088
Asset-backed						1,228			1,452			2,908			5,588
State and municipal			22			50			318			1,580			1,970
Other debt			539			1,426			637			413			3,015
	Total debt securities available for sale	$	566		$	4,413		$	4,603		$	40,631		$	50,213
Fair value		$	571		$	4,557		$	4,833		$	41,851		$	51,812
Weighted-average yield, GAAP basis			2.60	%		2.47	%		2.73	%		3.47	%		3.30	%
Securities Held to Maturity
US Treasury and government agencies											$	228		$	228
Residential mortgage-backed (agency)												4,578			4,578
Commercial mortgage-backed
	Agency				$	316		$	971			5			1,292
	Non-agency	$	8			53						2,723			2,784
Asset-backed						251			73			448			772
State and municipal			32			25			210			404			671
Other debt						1			355						356
Total debt securities held to maturity		$	40		$	646		$	1,609		$	8,386		$	10,681
Fair value		$	41		$	665		$	1,722		$	8,804		$	11,232
Weighted-average yield, GAAP basis			1.79	%		3.07	%		3.30	%		4.10	%		3.91	%

Based on current interest rates and expected prepayment speeds, the weighted-average expected maturity of mortgage and other asset-backed debt securities were as follows as of September 30, 2012:

Table 91: Weighted-Average Expected Maturity of Mortgage and Other Asset-Backed Debt Securities

	September 30,
	2012
Agency residential mortgage-backed securities		3.2	years
Non-agency residential mortgage-backed securities		4.9	years
Agency commercial mortgage-backed securities		4.9	years
Non-agency commercial mortgage-backed securities		2.7	years
Asset-backed securities		3.6	years

Weighted-average yields are based on historical cost with effective yields weighted for the contractual maturity of each security. At September 30, 2012, there were no securities of a single issuer, other than FNMA and FHLMC, that exceeded 10% of total shareholders' equity.

The following table presents the fair value of securities that have been either pledged to or accepted from others to collateralize outstanding borrowings.

Table 92: Fair Value of Securities Pledged and Accepted as Collateral

		September 30			December 31
In millions		2012			2011
Pledged to others			$	23,087		$	20,109
Accepted from others:
	Permitted by contract or custom to sell or repledge			1,204			1,796
	Permitted amount repledged to others			619			892

The securities pledged to others include positions held in our portfolio of investment securities, trading securities, and securities accepted as collateral from others that we are permitted by contract or custom to sell or repledge, and were used to secure public and trust deposits, repurchase agreements, and for other purposes. The securities accepted from others that we are permitted by contract or custom to sell or repledge are a component of Federal funds sold and resale agreements on our Consolidated Balance Sheet.