PNC » Topics » Commercial Mortgage Servicing Rights

This excerpt taken from the PNC 10-Q filed May 11, 2009.

Commercial Mortgage Servicing Rights

 

In millions    2009     2008  

Balance at January 1

   $ 864     $ 694  

Additions

     22       13  

Impairment reversal

     19      

Amortization expense

     (31 )     (29 )

Balance at March 31

   $ 874     $ 678  

We recognize as an other intangible asset the right to service mortgage loans for others. Commercial mortgage servicing rights are purchased in the open market and originated when loans are sold with servicing retained. Commercial mortgage servicing rights are initially recorded at fair value. These rights are subsequently measured using the amortization method. Accordingly, the commercial mortgage servicing rights are amortized in proportion to and over the period of estimated net servicing income over a period of 5 to 10 years.

Commercial mortgage servicing rights are periodically evaluated for impairment. For purposes of impairment, the commercial mortgage servicing rights are stratified based on asset type, which characterizes the predominant risk of the


 

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underlying financial asset. If the carrying amount of any individual stratum exceeds its fair value, a valuation reserve is established with a corresponding charge to Corporate Services on our Consolidated Income Statement.

The fair value of commercial mortgage servicing rights is estimated by using an internal valuation model. The model calculates the present value of estimated future net servicing cash flows considering estimates on servicing revenue and costs, discount rates and prepayment speeds.

Changes in the residential mortgage servicing rights follow:

This excerpt taken from the PNC 10-K filed Mar 2, 2009.

Commercial Mortgage Servicing Rights

 

In millions    2008     2007  

Balance at January 1

   $ 694     $ 471  

Additions (a)

     300       310  

Amortization expense

     (95 )     (87 )

Balance at December 31

     899       694  

Impairment charge

     (35 )        

Net carrying amount at December 31

   $ 864     $ 694  

 

(a) Includes $210 million in 2008 as part of the National City acquisition.

Servicing revenue from both commercial and residential mortgage servicing assets and liabilities generated contractually specified servicing fees, net interest income from servicing portfolio deposit balances, and ancillary fees totaling $171 million in 2008, $192 million in 2007 and $139 million in 2006. We also generate servicing revenue from fee-based activities provided to others.

Amortization expense on intangible assets for 2008, 2007 and 2006 was $228 million, $173 million and $99 million, respectively. The 2008 amortization expense includes a $35 million impairment charge for certain mortgage servicing rights due to the effect of lower interest rates. Amortization expense on existing intangible assets for 2009 through 2013 is estimated to be as follows:

   

2009: $297 million,

   

2010: $232 million,

   

2011: $227 million,

   

2012: $206 million, and

   

2013: $180 million.

The changes in the carrying amount of goodwill and net other intangible assets during 2008 follows:

EXCERPTS ON THIS PAGE:

10-Q
May 11, 2009
10-K
Mar 2, 2009
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