PNC Bank 2007 Annual Report Download - page 113

The following table sets forth regulatory capital ratios for
PNC and its only significant bank subsidiary, PNC Bank, N.A.
Regulatory Capital
December 31
Dollars in millions
Amount Ratios
2007 2006 2007 2006
Risk-based capital
Tier 1
PNC $7,815 $8,924 6.8% 10.4%
PNC Bank, N.A. 7,851 6,159 7.6 8.0
Total
PNC 11,803 11,559 10.3 13.5
PNC Bank, N.A. 10,616 8,541 10.2 11.1
Leverage
PNC NM NM 6.2 9.3
PNC Bank, N.A. NM NM 6.8 7.2
NM—Not meaningful.
The principal source of parent company cash flow is the
dividends it receives from PNC Bank, N.A., which may be
impacted by the following:
• Capital needs,
• Laws and regulations,
• Corporate policies,
• Contractual restrictions, and
• Other factors.
Also, there are statutory and regulatory limitations on the
ability of national banks to pay dividends or make other
capital distributions. The amount available for dividend
payments to the parent company by PNC Bank, N.A. without
prior regulatory approval was approximately $655 million at
December 31, 2007.
Under federal law, bank subsidiaries generally may not extend
credit to the parent company or its non-bank subsidiaries on
terms and under circumstances that are not substantially the
same as comparable extensions of credit to nonaffiliates. No
extension of credit may be made to the parent company or a
non-bank subsidiary which is in excess of 10% of the capital
stock and surplus of such bank subsidiary or in excess of 20%
of the capital and surplus of such bank subsidiary as to
aggregate extensions of credit to the parent company and its
non-bank subsidiaries. Such extensions of credit, with limited
exceptions, must be fully collateralized by certain specified
assets. In certain circumstances, federal regulatory authorities
may impose more restrictive limitations.
Federal Reserve Board regulations require depository
institutions to maintain cash reserves with the Federal Reserve
Bank (“FRB”). At December 31, 2007, the balance
outstanding at the FRB was $74 million.
N OTE 23 L EGAL P ROCEEDINGS
Adelphia
Some of our subsidiaries are defendants (or have potential
contractual contribution obligations to other defendants) in
several pending lawsuits brought during late 2002 and 2003
arising out of the bankruptcy of Adelphia Communications
Corporation and its subsidiaries.
One of the lawsuits was brought on Adelphia’s behalf by the
unsecured creditors’ committee and equity committee in
Adelphia’s consolidated bankruptcy proceeding and was
removed to the United States District Court for the Southern
District of New York by order dated February 9, 2006.
Pursuant to Adelphia’s plan of reorganization, this lawsuit will
be prosecuted by a contingent value vehicle, known as the
Adelphia Recovery Trust. In October 2007, the Adelphia
Recovery Trust filed an amended complaint in this lawsuit,
adding defendants and making additional allegations.
The other lawsuits, one of which is a putative consolidated
class action, were brought by holders of debt and equity
securities of Adelphia and have been consolidated for pretrial
purposes in the above district court. The bank defendants,
including the PNC defendants, have entered into a settlement
of the consolidated class action. This settlement was approved
by the district court in November 2006. In December 2006, a
group of class members appealed orders related to the
settlement to the United States Court of Appeals for the
Second Circuit. The amount for which we would be
responsible under this settlement is insignificant.
The non-settled lawsuits arise out of lending and investment
banking activities engaged in by PNC subsidiaries together
with other financial services companies. In the aggregate,
hundreds of other financial services companies and numerous
other companies and individuals have been named as
defendants in one or more of these lawsuits. Collectively, with
respect to some or all of the defendants, the lawsuits allege
federal law claims (including violations of federal securities
and banking laws), violations of common law duties, aiding
and abetting such violations, voidable preference payments,
and fraudulent transfers, among other matters. The lawsuits
seek monetary damages (including in some cases punitive or
treble damages), interest, attorneys’ fees and other expenses,
and a return of the alleged voidable preference and fraudulent
transfer payments, among other remedies.
We believe that we have defenses to the claims against us in
these lawsuits, as well as potential claims against third parties,
and intend to defend the remaining lawsuits vigorously. These
lawsuits involve complex issues of law and fact, presenting
complicated relationships among the many financial and other
participants in the events giving rise to these lawsuits, and
have not progressed to the point where we can predict the
outcome of the non-settled lawsuits. It is not possible to
determine what the likely aggregate recoveries on the part of
the plaintiffs in these remaining matters might be or the
portion of any such recoveries for which we would ultimately
be responsible, but the final consequences to PNC could be
material.
Data Treasury
In March 2006, a first amended complaint was filed in the
United States District Court for the Eastern District of Texas
by Data Treasury Corporation against PNC and PNC Bank,
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