PNC Bank 2006 Annual Report Download - page 107

We also own an interest-only strip related to education loans
totaling $59 million and $58 million, respectively, at
December 31, 2006 and December 31, 2005. This strip was
retained from the sales of education loans to a third party trust
prior to 2003. Loans that are held by the trust supporting the
value of the strip were $88 million and $123 million at
December 31, 2006 and December 31, 2005, respectively. The
principal of these loans is effectively guaranteed by the federal
government. The trust related to the securitization will
terminate in 2007.
N OTE 12 D EPOSITS
The aggregate amount of time deposits with a denomination of
$100,000 or more was $8.7 billion at December 31, 2006 and
$7.1 billion at December 31, 2005.
Contractual maturities of time deposits for the years 2007
through 2012 and thereafter are as follows:
• 2007: $16.5 billion,
• 2008: $.6 billion,
• 2009: $.4 billion,
• 2010: $.1 billion,
• 2011: $.1 billion, and
• 2012 and thereafter: $1.3 billion.
N OTE 13 B ORROWED F UNDS
Bank notes at December 31, 2006 totaling $1.1 billion have
interest rates ranging from 2.75% to 10.25% with
approximately $575 million maturing in 2007. Senior and
subordinated notes consisted of the following:
December 31, 2006
Dollars in millions Outstanding Stated Rate Maturity
Senior
Exchangeable $1,000 4.96% 2036
All other 1,535 4.20%–5.34% 2008-2010
Total senior 2,535
Subordinated
Junior 1,074 5.94%–10.01% 2007-2033
All other 2,888 4.88%–9.65% 2007-2017
Total
subordinated 3,962
Total senior
and
subordinated $6,497
Included in outstandings for the senior and subordinated notes
in the table above are basis adjustments of $13 million and $3
million, respectively, related to fair value accounting hedges
as of December 31, 2006.
Total borrowed funds at December 31, 2006 have scheduled
or anticipated repayments for the years 2007 through 2012 and
thereafter as follows:
• 2007: $8.4 billion,
• 2008: $1.4 billion,
• 2009: $.8 billion,
• 2010: $.8 billion,
• 2011: $6 million, and
• 2012 and thereafter: $3.6 billion.
Included in borrowed funds at December 31, 2006 are $1 billion
of Floating Rate Exchangeable Senior Notes (“Exchangeable
Notes”) that were issued through PNC Funding Corp
(“Funding”), a subsidiary of PNC. These notes commenced on
December 20, 2006 and are due December 20, 2036. Interest
will be paid at a floating rate equal to 3-month LIBOR, reset
quarterly, minus 40 basis points, quarterly in arrears, provided
that such interest rate will never be less than 0% per annum.
The Exchangeable Notes are guaranteed by PNC.
Holders may exchange the Exchangeable Notes for, as
specified by Funding, shares of PNC common stock, cash, or a
combination of shares and cash at any time on or prior to
maturity based on an initial exchange price per share of
approximately $128.56, subject to adjustment. Holders have
the right to require PNC to repurchase all or a portion of the
Exchangeable Notes on December 20, 2007 and periodically
thereafter for an amount equal to 100% of the principal plus
accrued and unpaid interest. Beginning on December 26,
2007, PNC may redeem the Exchangeable Notes in whole at
any time, or in part from time to time, for an amount equal to
100% of the principal plus accrued and unpaid interest.
In connection with the issuance of the Exchangeable Notes,
PNC entered into a Registration Rights Agreement
(“Agreement”) with the initial purchaser of the Exchangeable
Notes. As part of the Agreement PNC agreed to file a
registration statement with the SEC, as soon as practicable but
in any event within 120 days after the issue date, to register
for resale the Exchangeable Notes and the common stock
deliverable upon exchange for the Exchangeable Notes. PNC
also agreed, among other things, to use its best efforts to cause
the registration statement to be declared effective as promptly
as practicable but in any event within 240 days after the issue
date and to keep the registration statement continuously
effective until registration is no longer applicable.
If PNC does not meet these obligations, PNC will be subject
to liquidated damages equal to 0.25% per annum of the
principal amount of the Exchangeable Notes outstanding.
Assuming the Exchangeable Notes remain outstanding
through 2036 and PNC does not meet these obligations, the
maximum consideration that PNC could be required to
transfer under this Agreement is approximately $75 million.
We have not recorded a liability for this Agreement at
December 31, 2006.
See Note 14 Capital Securities of Subsidiary Trusts for
information about the $1.1 billion of junior subordinated debt.
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