PNC Bank 2005 Annual Report Download - page 111

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We also enter into credit default swaps under which we
buy loss protection from or sell loss protection to a
counterparty in the event of default of a reference
obligation. The fair value of the contracts sold on our
Consolidated Balance Sheet was a net asset of $3 million at
December 31, 2005. The maximum amount we would be
required to pay under the credit default swaps in which we
sold protection, assuming all reference obligations default
at a total loss, without recoveries, was $396 million at
December 31, 2005. We purchased $343 million notional
of credit default swaps to mitigate the exposure of certain
written credit default swaps at December 31, 2005.
We have entered into various contingent performance
guarantees through credit risk participation arrangements
with terms ranging from less than 1 year to 12 years. We
will be required to make payments under these guarantees
if a customer defaults on its obligation to perform under
certain credit agreements with third parties. Our exposure
under these agreements is approximately $179 million at
December 31, 2005.
CONTINGENT PAYMENTS IN CONNECTION WITH
CERTAIN ACQUISITIONS
A number of the acquisition agreements to which we are a
party and under which we have purchased various types of
assets, including the purchase of entire businesses, partial
interests in companies, or other types of assets, require us
to make additional payments in future years if certain
predetermined goals are achieved or not achieved within a
specific time period. Due to the nature of the contract
provisions, we cannot quantify our total exposure that may
result from these agreements.
NOTE 25 PARENT COMPANY
Summarized financial information of the parent company
is as follows:
Income Statement
Year ended December 31 - in millions 2005 2004 2003
OPERATING REVENUE
Dividends from:
Bank subsidiaries $717 $895 $874
Non-bank subsidiaries 72 187 68
Interest income 8 4 2
NONonin
terest income 6
Total operating revenue 803 1,086 944
OPERATING EXPENSE
Interest expense 71 42 49
Other expense 11 5 26
Total operating expense 82 47 75
Income before income taxes and
equity in undistributed net income
of subsidiaries 721 1,039 869
Income tax benefits (24) (17) (26)
Income before equity in
undistributed net income of
subsidiaries 745 1,056 895
Bank subsidiaries 396 98 189
Non-bank subsidiaries 184 43 (83)
Net income $1,325 $1,197 $1,001
Balance Sheet
December 31
-
in mill
ions
2005
2004
ASSETS
Cash and due from banks $3 $1
Short-term investments with subsidiary bank 8
Securities available for sale 293 383
Investments in:
Bank subsidiaries 7,140 6,414
Non-bank subsidiaries 2,504 1,556
Other assets 237 197
Total
assets
$10,177
$8,559
LIABILITIES
Subordinated debt $1,326 $871
Accrued expenses and other liabilities 288 215
Total liabilities
1,614
1,086
S
HAREHOLDERS
’
E
QUITY
8,563
7,473
Total liabilities and shareholders’ equity $10,177 $8,559
Commercial paper and all other debt issued by PNC Funding
Corp, a wholly owned finance subsidiary, is fully and
unconditionally guaranteed by the parent company. In addition,
in connection with certain affiliates’ commercial mortgage
servicing operations, the parent company has committed to
maintain such affiliates’ net worth above minimum
requirements.
The parent company received net income tax refunds of $19
million in 2005 and $44 million in 2003. Such refunds
represent the parent company’ s portion of consolidated income
taxes. The parent company made income tax payments of $9
million in 2004. The parent company paid interest of $94
million in 2005, $62 million in 2004 and $51 million in 2003.