PNC Bank 2002 Annual Report Download - page 94

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92
Fair Value Assumptions
December 31, 2002
Dollars in millions
Residential
Mortgages
Student
Loans Other
Fair value of retained interest
(carrying value) $9 $65 $3
Weighted-average life (in years) 1.1 1.6 1.8
Residual cash flows discount rate 7.50% 3.6 4.14%
Impact on fair value of 10%
adverse change $(.9)
Impact on fair value of 20%
adverse change $(.1) (1.7)
Prepayment speed assumption
(CPR) 60.0% 20.8% (a)
Impact on fair value of 10%
adverse change $(.8) $(.8) (a)
Impact on fair value of 20%
adverse change (1.4) (1.6) (a)
(a) Historically, there have been no prepayments on these loans, which are guaranteed by an
agency of the U. S. Government.
These sensitivities are hypothetical and should be used with
caution. As the figures indicate, changes in fair value based on
a 10% variation in assumptions generally cannot be
extrapolated because the relationship of the change in
assumption to the change in fair value may not be linear. Also,
the effect of a variation in a particular assumption on fair value
is calculated independently of variations in other assumptions,
whereas a change in one factor may realistically have an impact
on another, which might magnify or counteract the
sensitivities.
NOTE 16 DEPOSITS
The aggregate amount of time deposits with a denomination
greater than $100,000 was $2.7 billion and $4.0 billion at
December 31, 2002 and 2001, respectively. Remaining
contractual maturities of time deposits for the years 2003
through 2007 and thereafter are $5.7 billion, $2.4 billion, $947
million, $473 million and $1.1 billion, respectively.
NOTE 17 BORROWED FUNDS
Bank notes have interest rates ranging from 1.46% to 6.14%
with approximately 60% maturing in 2003. Senior and
subordinated notes consisted of the following:
December 31, 2002
Dollars in millions Outstanding Stated Rate Maturity
Senior $2,546 1.93% – 7.00% 2003 – 2006
Subordinated
Nonconvertible 2,423 6.13 – 8.25 2003 – 2009
Total $4,969
Borrowed funds have scheduled repayments for the years
2003 through 2007 and thereafter of $3.1 billion, $2.1 billion,
$1.1 billion, $1.2 billion and $1.6 billion, respectively. Included
in borrowed funds are Federal Home Loan Bank advances of
$1.3 billion at December 31, 2002 which are collateralized by a
blanket lien.
Included in outstandings for the senior and subordinated
notes in the table above are basis adjustments of $93 million
and $212 million, respectively, related to SFAS No. 133.
NOTE 18 CAPITAL SECURITIES OF SUBSIDIARY
TRUSTS
Mandatorily Redeemable Capital Securities of Subsidiary
Trusts (“Capital Securities”) include nonvoting preferred
beneficial interests in the assets of PNC Institutional Capital
Trust A, Trust B and Trust C. Trust A, formed in December
1996, holds $350 million of 7.95% junior subordinated
debentures, due December 15, 2026, and redeemable after
December 15, 2006, at a premium that declines from
103.975% to par on or after December 15, 2016. Trust B,
formed in May 1997, holds $300 million of 8.315% junior
subordinated debentures due May 15, 2027, and redeemable
after May 15, 2007, at a premium that declines from
104.1575% to par on or after May 15, 2017. Trust C, formed
in June 1998, holds $200 million of junior subordinated
debentures due June 1, 2028, bearing interest at a floating rate
per annum equal to 3-month LIBOR plus 57 basis points. The
rate in effect at December 31, 2002 was 1.99%. Trust C
Capital Securities are redeemable on or after June 1, 2008 at
par.
Cash distributions on the Capital Securities are made to the
extent interest on the debentures is received by the Trusts. In
the event of certain changes or amendments to regulatory
requirements or federal tax rules, the Capital Securities are
redeemable in whole.
Trust A is a wholly owned finance subsidiary of PNC
Bank, N.A., PNC’s principal bank subsidiary, and Trusts B
and C are wholly owned finance subsidiaries of the
Corporation.
The respective parents of the Trusts have, through the
agreements governing the Capital Securities, taken together,
fully, irrevocably and unconditionally guaranteed all of the
obligations of the Trusts under the Capital Securities. See
Note 3 Regulatory Matters for a discussion of certain dividend
restrictions.
NOTE 19 SHAREHOLDERS’ EQUITY
Information related to preferred stock is as follows:
Preferred Shares
December 31
Shares in thousands
Liquidation
value per share 2002 2001
A
uthorized
$
1
p
ar value 17
,
135 17
,
172
Issued and outstanding
Series A 40 910
Series B 40 33
Series C 20 187 204
Series D 20 273 293
Total 472 510