PNC Bank 2000 Annual Report Download - page 57

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54
The following table sets forth, by designated assets and liabilities, the notional value and the estimated fair value of
financial derivatives used for risk management. Weighted-average interest rates presented are based on the implied forward
yield curve at December 31, 2000.
FI N A N C I A L DE R I V A T I V E S
Notional Estimated Weighted-Average Interest Rates
December 31, 2000 - dollars in millions Value Fair Value Paid Received
Interest rate risk management
Asset rate conversion
Interest rate swaps (1)
Receive fixed designated to loans. . . . . . . . . . . . . . . . . . . . . . $3,250 $27 5.96% 5.56%
Basis swaps designated to other earning assets . . . . . . . . . . . . 226 3 5.63 5.85
Interest rate caps designated to loans (2) . . . . . . . . . . . . . . . . . . . 308 4 NM NM
Interest rate floors designated to loans (3) . . . . . . . . . . . . . . . . . . . 3,238 (1) NM NM
Total asset rate conversion . . . . . . . . . . . . . . . . . . . . . . . . . 7,022 33
Liability rate conversion
Interest rate swaps (1)
Receive fixed designated to:
Interest-bearing deposits . . . . . . . . . . . . . . . . . . . . . . . . . . 125 4 5.85 6.73
Borrowed funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,381 57 5.96 6.60
Pay fixed designated to borrowed funds . . . . . . . . . . . . . . . . . 1 5.88 5.78
Basis swaps designated to borrowed funds . . . . . . . . . . . . . . . 2,004 10 5.76 5.79
Total liability rate conversion . . . . . . . . . . . . . . . . . . . . . . . 3,511 71
Total interest rate risk management . . . . . . . . . . . . . . . . . . . . . . 10,533 104
Commercial mortgage banking risk management
Pay fixed interest rate swaps designated to securities (1) . . . . . . . . . 135 (8) 6.94 6.04
Pay fixed interest rate swaps designated to loans (1) . . . . . . . . . . . . . 251 (2) 6.27 6.04
Total commercial mortgage banking risk management. . . . . . . . . 386 (10)
Student lending activities – Forward contracts . . . . . . . . . . . . . . . . . . 347 NM NM
Credit-related activities – Credit default swaps . . . . . . . . . . . . . . . . . 4,391 (2) NM NM
Total financial derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $15,657 $92
(1) The floating rate portion of interest rate contracts is based on money-market indices. As a percent of notional value, 62% were based on 1-month
LIBOR, 36% on 3-month LIBOR and the remainder on other short-term indices.
(2) Interest rate caps with notional values of $61 million, $95 million and $150 million require the counterparty to pay the Corporation the excess, if any,
of 3-month LIBOR over a weighted-average strike of 6.00% , 1-month LIBOR over a weighted-average strike of 5.68% and Prime over a weighted-
average strike of 8.76% , respectively. At December 31, 2000, 3-month LIBOR was 6.40% , 1-month LIBOR was 6.56% and Prime was 9.50%.
(3) Interest rate floors with notional values of $3.0 billion, require the counterparty to pay the excess, if any, of the weighted-average strike of 4.63% over
3-month LIBOR. At December 31, 2000, 3-month LIBOR was 6.40%.
NM – Not meaningful
OT H E R DE R I VA T I V E S
To accommodate customer needs, PNC enters into cus-
tomer-related financial derivative transactions primarily
consisting of interest rate swaps, caps, floors and foreign
exchange contracts. Risk exposure from customer positions
is managed through transactions with other dealers.
Additionally, the Corporation enters into other deriva-
tive transactions for risk management purposes. These posi-
tions are recorded at estimated fair value and changes in
value are included in results of operations.