Home Equity Repurchase Obligations PNC’s repurchase obligations include obligations with respect to certain brokered home equity loans/lines that were sold to a limited number of private investors in the financial services industry by National City prior to our acquisition of National City.
PNC is no longer engaged in the brokered home equity lending business, and our exposure under these loan repurchase obligations is limited to repurchases of the loans sold in these transactions.
Repurchase activity associated with brokered home equity lines/loans is reported in the NonStrategic Assets Portfolio segment.
Loan covenants and representations and warranties were established through loan sale agreements with various investors to provide assurance that loans PNC sold to the investors are of sufficient investment quality.
Key aspects of such covenants and representations and warranties include the loan’s compliance with any applicable loan criteria established for the transaction, including underwriting standards, delivery of all required loan documents to the investor or its designated party, sufficient collateral valuation, and the validity of the lien securing the loan.
As a result of alleged breaches of these contractual obligations, investors may request PNC to indemnify them against losses on certain loans or to repurchase loans.
We investigate every investor claim on a loan by loan basis to determine the existence of a legitimate claim, and that all other conditions for indemnification or repurchase have been met prior to settlement with that investor.
Indemnifications for loss or loan repurchases typically occur when, after review of the claim, we agree insufficient evidence exists to dispute the investor’s claim that a breach of a loan covenant and representation and warranty has occurred, such breach has not been cured, and the effect of such breach is deemed to have had a material and adverse effect on the value of the transferred loan.
Depending on the sale agreement and upon proper notice from the investor, we typically respond to home equity indemnification and repurchase requests within 60 days, although final resolution of the claim may take a longer period of time.
Most home equity sale agreements do not provide for penalties or other remedies if we do not respond timely to investor indemnification or repurchase requests.
Investor indemnification or repurchase claims are typically settled on an individual loan basis through make-whole payments or loan repurchases; however, on occasion we may negotiate pooled settlements with investors.
In connection with pooled settlements, we typically do not repurchase loans and the consummation of such transactions generally results in us no longer having indemnification and repurchase exposure with the investor in the transaction.
The following table details the unpaid principal balance of our unresolved home equity indemnification and repurchase claims at December 31, 2012 and December 31, 2011, respectively.
Table 31: Analysis of Home Equity Unresolved Asserted Indemnification and Repurchase Claims
## Table 0 ##
(a) Activity relates to brokered home equity loans/lines sold through loan sale transactions which occurred during 2005-2007.
borrower performance under the trial payment period, we will capitalize the original contractual amount past due and restructure the loan’s contractual terms, along with bringing the restructured account to current.
As the borrower is often already delinquent at the time of participation in the HAMP trial payment period, there is not a significant increase in the ALLL.
If the trial payment period is unsuccessful, the loan will be evaluated for further action based upon our existing policies.
Residential conforming and certain residential construction loans have been permanently modified under HAMP or, if they do not qualify for a HAMP modification, under PNCdeveloped programs, which in some cases may operate similarly to HAMP.
These programs first require a reduction of the interest rate followed by an extension of term and, if appropriate, deferral of principal payments.
As of December 31, 2012 and December 31, 2011, 4,188 accounts with a balance of $627 million and 2,701 accounts with a balance of $478 million, respectively, of residential real estate loans have been modified under HAMP and were still outstanding on our balance sheet.
We do not re-modify a defaulted modified loan except for subsequent significant life events.
A re-modified loan continues to be classified as a TDR for the remainder of its term regardless of subsequent payment performance.
Commercial Loan Modifications and Payment Plans Modifications of terms for large commercial loans are based on individual facts and circumstances.
Commercial loan modifications may involve reduction of the interest rate, extension of the term of the loan and/or forgiveness of principal.
Modified large commercial loans are usually already nonperforming prior to modification.
We evaluate these modifications for TDR classification based upon whether we granted a concession to a borrower experiencing financial difficulties.
Additional detail on TDRs is discussed below as well as in Note 5 Asset Quality in the Notes To Consolidated Financial Statements in Item 8 of this Report.
Beginning in 2010, we established certain commercial loan modification and payment programs for small business loans, Small Business Administration loans, and investment real estate loans.
As of December 31, 2012 and December 31, 2011, $68 million and $81 million, respectively, in loan balances were covered under these modification and payment plan programs.
Of these loan balances, $24 million have been determined to be TDRs as of both December 31, 2012 and December 31, 2011.
Troubled Debt Restructurings A TDR is a loan whose terms have been restructured in a manner that grants a concession to a borrower experiencing financial difficulties.
TDRs typically result from our loss mitigation activities and include rate reductions, principal forgiveness, postponement/reduction of scheduled amortization, extensions, and bankruptcy discharges from personal liability, which are intended to minimize economic loss and to avoid foreclosure or repossession of collateral.
For the year ended December 31, 2012, $3.1 billion of loans held for sale, loans accounted for under the fair value option, pooled purchased impaired loans, as well as certain consumer government insured or guaranteed loans which were evaluated for TDR consideration, are not classified as TDRs.
The comparable amount for the year ended December 31, 2011 was $2.7 billion.
Table 42: Summary of Troubled Debt Restructurings
## Table 1 ##
(a) Includes credit cards and certain small business and consumer credit agreements whose terms have been restructured and are TDRs.
However, since our policy is to exempt these loans from being placed on nonaccrual status as permitted by regulatory guidance as generally these loans are directly charged off in the period that they become 180 days past due, these loans are excluded from nonperforming loans.
(b) Pursuant to regulatory guidance issued in the third quarter of 2012, additional troubled debt restructurings related to changes in treatment of certain loans of $366 million in 2012, net of charge-offs, resulting from bankruptcy where no formal reaffirmation was provided by the borrower and therefore a concession has been granted based upon discharge from personal liability were added to the consumer lending population.
The additional TDR population increased nonperforming loans by $288 million.
Charge-offs have been taken where the fair value less costs to sell the collateral was less than the recorded investment of the loan and were $128.1 million.
Of these nonperforming loans, approximately 78% were current on their payments at December 31, 2012.
(c) Accruing loans have demonstrated a period of at least six months of performance under the restructured terms and are excluded from nonperforming loans.
Total TDRs increased $656 million or 30% during the year ended December 31, 2012 to $2.9 billion.
Of this total, nonperforming TDRs totaled $1.6 billion, which represents approximately 49% of total nonperforming loans.
NOTE 4 LOANS AND COMMITMENTS TO EXTEND CREDIT Loans outstanding were as follows: Table 62: Loans Outstanding
## Table 2 ##
(a) Net of unearned income, net deferred loan fees, unamortized discounts and premiums, and purchase discounts and premiums totaling $2.7 billion and $2.3 billion at December 31, 2012 and December 31, 2011, respectively.
(b) Future accretable yield related to purchased impaired loans is not included in loans outstanding.
In the normal course of business, we originate or purchase loan products with contractual features, when concentrated, that may increase our exposure as a holder of those loan products.
Possible product features that may create a concentration of credit risk would include a high original or updated LTV ratio, terms that may expose the borrower to future increases in repayments above increases in market interest rates, below-market interest rates and interest-only loans, among others.
We also originate home equity loans and lines of credit that are concentrated in our primary geographic markets.
We originate interest-only loans to commercial borrowers.
This is usually to match our borrowers’ asset conversion to cash expectations (i. e. , working capital lines, revolvers).
These products are standard in the financial services industry and are considered during the underwriting process to mitigate the increased risk that may result in borrowers not being able to make interest and principal payments when due.
We do not believe that these product features create a concentration of credit risk.
At December 31, 2012, we pledged $23.2 billion of commercial loans to the Federal Reserve Bank and $37.3 billion of residential real estate and other loans to the Federal Home Loan Bank as collateral for the contingent ability to borrow, if necessary.
The comparable amounts at December 31, 2011 were $21.8 billion and $27.7 billion, respectively.
Table 63: Net Unfunded Credit Commitments
## Table 3 ##
(a) Excludes standby letters of credit.
See Note 24 Commitments and Guarantees for additional information on standby letters of credit.
Commitments to extend credit represent arrangements to lend funds or provide liquidity subject to specified contractual conditions.
At December 31, 2012, commercial commitments reported above exclude $22.5 billion of syndications, assignments and participations, primarily to financial institutions.
The comparable amount at December 31, 2011 was $20.2 billion.
Commitments generally have fixed expiration dates, may require payment of a fee, and contain termination clauses in the event the customer’s credit quality deteriorates.
Based on our historical experience, most commitments expire unfunded, and therefore cash requirements are substantially less than the total commitment.
NOTE 15 EMPLOYEE BENEFIT PLANS PENSION AND POSTRETIREMENT PLANS We have a noncontributory, qualified defined benefit pension plan covering eligible employees.
Benefits are determined using a cash balance formula where earnings credits are a percentage of eligible compensation.
Earnings credit percentages for plan participants on December 31, 2009 are frozen at their level earned to that point.
Earnings credits for all employees who become participants on or after January 1, 2010 are a flat 3% of eligible compensation.
Participants at December 31, 2009 earn interest based on 30-year Treasury securities with a minimum rate, while new participants on or after January 1, 2010 are not subject to the minimum rate.
Pension contributions are based on an actuarially determined amount necessary to fund total benefits payable to plan participants.
We also maintain nonqualified supplemental retirement plans for certain employees and provide certain health care and life insurance benefits for qualifying retired employees (postretirement benefits) through various plans.
The nonqualified pension and postretirement benefit plans are unfunded.
The Company reserves the right to terminate plans or make plan changes at any time.
PNC acquired RBC Bank (USA) during the first quarter of 2012.
RBC Bank (USA) employees began to participate in PNC’s pension and 401(k) plans upon meeting the plan’s eligibility requirements.
Some grandfathered employees will also be eligible for PNC’s postretirement medical benefits.
We use a measurement date of December 31 for plan assets and benefit obligations.
A reconciliation of the changes in the projected benefit obligation for qualified pension, nonqualified pension and postretirement benefit plans as well as the change in plan assets for the qualified pension plan follows.
Table 118: Reconciliation of Changes in Projected Benefit Obligation and Change in Plan Assets
## Table 4 ##

<table><tr><td>In millions</td><td>December 31 2012</td><td>December 31 2011</td></tr><tr><td>Home equity loans/lines:</td><td></td><td></td></tr><tr><td>Private investors (a)</td><td>$74</td><td>$110</td></tr></table>
<table><tr><td>In millions</td><td>Dec. 312012</td><td>Dec. 312011</td></tr><tr><td>Consumer lending:</td><td></td><td></td></tr><tr><td>Real estate-related</td><td>$2,028</td><td>$1,492</td></tr><tr><td>Credit card (a)</td><td>233</td><td>291</td></tr><tr><td>Other consumer</td><td>57</td><td>15</td></tr><tr><td>Total consumer lending (b)</td><td>2,318</td><td>1,798</td></tr><tr><td>Total commercial lending</td><td>541</td><td>405</td></tr><tr><td>Total TDRs</td><td>$2,859</td><td>$2,203</td></tr><tr><td>Nonperforming</td><td>$1,589</td><td>$1,141</td></tr><tr><td>Accruing (c)</td><td>1,037</td><td>771</td></tr><tr><td>Credit card (a)</td><td>233</td><td>291</td></tr><tr><td>Total TDRs</td><td>$2,859</td><td>$2,203</td></tr></table>
<table><tr><td>In millions</td><td>December 312012</td><td>December 312011</td></tr><tr><td>Commercial lending</td><td></td><td></td></tr><tr><td>Commercial</td><td>$83,040</td><td>$65,694</td></tr><tr><td>Commercial real estate</td><td>18,655</td><td>16,204</td></tr><tr><td>Equipment lease financing</td><td>7,247</td><td>6,416</td></tr><tr><td>Total Commercial Lending</td><td>108,942</td><td>88,314</td></tr><tr><td>Consumer lending</td><td></td><td></td></tr><tr><td>Home equity</td><td>35,920</td><td>33,089</td></tr><tr><td>Residential real estate</td><td>15,240</td><td>14,469</td></tr><tr><td>Credit card</td><td>4,303</td><td>3,976</td></tr><tr><td>Other consumer</td><td>21,451</td><td>19,166</td></tr><tr><td>Total consumer lending</td><td>76,914</td><td>70,700</td></tr><tr><td>Total loans (a) (b)</td><td>$185,856</td><td>$159,014</td></tr></table>
<table><tr><td>In millions</td><td>December 312012</td><td>December 312011</td></tr><tr><td>Commercial and commercial real estate</td><td>$78,703</td><td>$64,955</td></tr><tr><td>Home equity lines of credit</td><td>19,814</td><td>18,317</td></tr><tr><td>Credit card</td><td>17,381</td><td>16,216</td></tr><tr><td>Other</td><td>4,694</td><td>3,783</td></tr><tr><td>Total (a)</td><td>$120,592</td><td>$103,271</td></tr></table>
<table><tr><td></td><td colspan="2">Qualified Pension</td><td colspan="2">Nonqualified Pension</td><td colspan="2">Postretirement Benefits</td></tr><tr><td>December 31 (Measurement Date) – in millions</td><td>2012</td><td>2011</td><td>2012</td><td>2011</td><td>2012</td><td>2011</td></tr><tr><td>Accumulated benefit obligation at end of year</td><td>$4,432</td><td>$4,095</td><td>$357</td><td>$289</td><td></td><td></td></tr><tr><td>Projected benefit obligation at beginning of year</td><td>$4,188</td><td>$3,803</td><td>$297</td><td>$290</td><td>$397</td><td>$393</td></tr><tr><td>National City acquisition</td><td></td><td></td><td></td><td></td><td>-1</td><td>2</td></tr><tr><td>RBC Bank (USA) acquisition</td><td></td><td></td><td>52</td><td></td><td>13</td><td></td></tr><tr><td>Service cost</td><td>101</td><td>94</td><td>4</td><td>4</td><td>5</td><td>5</td></tr><tr><td>Interest cost</td><td>191</td><td>196</td><td>14</td><td>13</td><td>16</td><td>19</td></tr><tr><td>Actuarial (gains)/losses and changes in assumptions</td><td>358</td><td>304</td><td>28</td><td>15</td><td>-18</td><td>-1</td></tr><tr><td>Participant contributions</td><td></td><td></td><td></td><td></td><td>13</td><td>13</td></tr><tr><td>Federal Medicare subsidy on benefits paid</td><td></td><td></td><td></td><td></td><td>2</td><td>2</td></tr><tr><td>Early Retirement Reinsurance Program payments received</td><td></td><td></td><td></td><td></td><td>1</td><td>1</td></tr><tr><td>Benefits paid</td><td>-326</td><td>-209</td><td>-33</td><td>-25</td><td>-34</td><td>-37</td></tr><tr><td>Projected benefit obligation at end of year</td><td>$4,512</td><td>$4,188</td><td>$362</td><td>$297</td><td>$394</td><td>$397</td></tr><tr><td>Fair value of plan assets at beginning of year</td><td>$3,805</td><td>$3,991</td><td></td><td></td><td></td><td></td></tr><tr><td>Actual return on plan assets</td><td>530</td><td>23</td><td></td><td></td><td></td><td></td></tr><tr><td>Employer contribution</td><td></td><td></td><td>$33</td><td>$25</td><td>$19</td><td>$22</td></tr><tr><td>Participant contributions</td><td></td><td></td><td></td><td></td><td>13</td><td>13</td></tr><tr><td>Federal Medicare subsidy on benefits paid</td><td></td><td></td><td></td><td></td><td>2</td><td>2</td></tr><tr><td>Benefits paid</td><td>-326</td><td>-209</td><td>-33</td><td>-25</td><td>-34</td><td>-37</td></tr><tr><td>Fair value of plan assets at end of year</td><td>$4,009</td><td>$3,805</td><td></td><td></td><td></td><td></td></tr><tr><td>Funded status</td><td>$-503</td><td>$-383</td><td>$-362</td><td>$-297</td><td>$-394</td><td>$-397</td></tr><tr><td>Amounts recognized on the consolidated balance sheet</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Current liability</td><td></td><td></td><td>-36</td><td>-30</td><td>-28</td><td>-34</td></tr><tr><td>Noncurrent liability</td><td>-503</td><td>-383</td><td>-326</td><td>-267</td><td>-366</td><td>-363</td></tr><tr><td>Liabilities recognized on the consolidated balance sheet</td><td>$-503</td><td>$-383</td><td>$-362</td><td>$-297</td><td>$-394</td><td>$-397</td></tr><tr><td>Amounts recognized in accumulated other comprehensive income consist of:</td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Prior service cost (credit)</td><td>$-31</td><td>$-39</td><td>$1</td><td>$2</td><td>$-9</td><td>$-11</td></tr><tr><td>Net actuarial loss</td><td>1,110</td><td>1,087</td><td>93</td><td>71</td><td>37</td><td>54</td></tr><tr><td>Amount recognized in AOCI</td><td>$1,079</td><td>$1,048</td><td>$94</td><td>$73</td><td>$28</td><td>$43</td></tr></table>

Question: What will Interest cost for Qualified Pension be like in2013 if it develops with the same increasing rate as current? (in million)
Answer: 186.12755