PNC Bank 2000 Annual Report Download - page 71

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68
SFAS No. 140, “Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities” (a
replacement of SFAS No. 125) was issued in September
2000 and replaces SFAS No. 125. Although SFAS No. 140
has changed many of the rules regarding securitizations, it
continues to require an entity to recognize the financial and
servicing assets it controls and the liabilities it has incurred
and to derecognize financial assets when control has been
surrendered in accordance with the criteria provided in the
standard. As required, the Corporation will apply the new
rules prospectively to transactions beginning in the second
quarter of 2001. Based on current circumstances, manage-
ment believes that the application of the new rules will not
have a material impact on the Corporation’s financial posi-
tion or results of operations. SFAS No. 140 requires certain
disclosures pertaining to securitization transactions effec-
tive for fiscal years ending after December 15, 2000. These
disclosures are included in Note 12.
NO T E 2 DI S C O N T I N U E D OP E R AT I O N S
On October 2, 2000, PNC announced that it reached a
definitive agreement to sell its residential mortgage banking
business. The capital made available by the sale will be
redeployed in a number of ways, which may include repur-
chasing common stock, continuing to reduce balance sheet
leverage, reducing debt and making targeted investments in
higher-growth businesses. The amount of capital available
for redeployment and the income statement impact of the
sale will depend on fair market values and other factors,
and will not be determined until final settlement. The
transaction closed on January 31, 2001.
Earnings for the residential mortgage banking business
for the years ended December 31, 2000, 1999 and 1998
were $65 million, $62 million and $35 million, respectively,
and are reflected in discontinued operations throughout the
Corporation’s financial statements. Earnings and net assets
of the residential mortgage banking business are shown sep-
arately on one line in the income statement and balance
sheet, respectively, for all periods presented.
IN V E S T M E N T I N DI S C O N T I N U E D OP E R AT I O N S
December 31 - in millions 2000 1999
Loans held for sale . . . . . . . . . . . . . $3,003 $2,321
Securities available for sale . . . . . . . 3,016 1,651
Loans, net of unrealized income . . . . 739 373
Goodwill and other
amortizable assets . . . . . . . . . . . . 1,925 1,611
All other assets . . . . . . . . . . . . . . . . 1,168 434
Total assets . . . . . . . . . . . . . . . . . 9,851 6,390
Deposits . . . . . . . . . . . . . . . . . . . . . 1,150 866
Borrowed funds . . . . . . . . . . . . . . . . 7,601 5,118
Other liabilities . . . . . . . . . . . . . . . . 744 143
Total liabilities . . . . . . . . . . . . . . 9,495 6,127
Net assets . . . . . . . . . . . . . . . . . . $356 $263
The notional and fair value of financial derivatives used for
residential mortgage banking risk management were
$15.2 billion and $124 million, respectively, at
December 31, 2000. The comparable amounts at
December 31, 1999 were $9.3 billion and $28 million,
respectively. The weighted-average maturity of financial
derivatives used for residential mortgage banking risk m a n -
agement was 2 years and 2 months at December 31, 2000.
NO T E 3 SA L E O F SU B S I D I A RY ST O C K
PNC recognizes as income the gain from the sale of stock by
its subsidiaries. The gain is the difference between PNC’s
basis in the stock and the proceeds per share received. PNC
provides applicable taxes on the gain.
In October 1999, BlackRock, Inc. (“BlackRock”), a
majority-owned investment management subsidiary of the
Corporation, issued nine million shares of class A common
stock at $14.00 per share in an initial public offering
(“IPO”). Prior to the IPO, PNC and BlackRock’s manage-
ment owned approximately 82% and 18% , respectively, of
BlackRock’s outstanding common stock. Proceeds from the
sale were approximately $115 million and resulted in PNC
recording a pretax gain in the amount of $64 million or $59
million after tax. As of December 31, 2000, PNC owned
approximately 70% of BlackRock.