PNC Bancorp, Inc. Successor to First National Pennsylvania Corporation, et al. - Page 18

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          amounts were included in income and deducted by FNPC for Federal            
          income tax purposes on a current basis.  Because respondent's               
          adjustments were based on the balances in the FNPC ledger                   
          accounts, those adjustments took into account any amortization or           
          yield adjustment that was reflected in such accounts.                       

               UFB Costs at Issue                                                     

               UFB adopted SFAS 91 effective for 1988 on a retroactive                
          basis for its outstanding residential mortgage loans and on a               
          prospective basis for its other loans.  Prior to its application            
          of SFAS 91, UFB, in accordance with its established accounting              
          practices, treated the costs described in SFAS 91 as current                
          expenses for financial accounting and reporting purposes.  In               
          1988, UFB began to defer fees and costs described in SFAS 91 for            
          financial accounting and reporting purposes.  For each of the               
          years in issue and, to the best knowledge of management, for all            
          prior years, UFB currently deducted the costs described in SFAS             
          91 for Federal income tax purposes.  To apply SFAS 91, UFB                  
          established ledger accounts to record fees and costs subject to             
          deferral with respect to several categories of loans in                     
          accordance with SFAS 91.  Unlike the ending balances in the FNPC            
          ledger accounts, which reflected only net numbers, the UFB ledger           
          accounts recorded fees and costs separately.  In addition, the              
          amortization or adjustments to yield of amounts deferred under              
          SFAS 91 by UFB were recorded in separate general ledger accounts.           





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