PNC Bank 2007 Annual Report Download - page 115

activities. One of these situations is in connection with
investigations of practices in the mutual fund industry, where
several of our subsidiaries have received requests for
information and other inquiries from governmental and
regulatory authorities.
Our practice is to cooperate fully with regulatory and
governmental investigations, audits and other inquiries,
including those described above. Such investigations, audits
and other inquiries may lead to remedies such as fines,
restitution or alterations in our business practices.
Other
In addition to the proceedings or other matters described
above, PNC and persons to whom we may have
indemnification obligations, in the normal course of business,
are subject to various other pending and threatened legal
proceedings in which claims for monetary damages and other
relief are asserted. See Note 24 Commitments and Guarantees
for additional information regarding the Visa indemnification
and our obligation to provide indemnification to current and
former officers, directors, employees and agents of PNC and
companies we have acquired. We do not anticipate, at the
present time, that the ultimate aggregate liability, if any,
arising out of such other legal proceedings will have a
material adverse effect on our financial position. However, we
cannot now determine whether or not any claims asserted
against us or others to whom we may have indemnification
obligations, whether in the proceedings or other matters
specifically described above or otherwise, will have a material
adverse effect on our results of operations in any future
reporting period.
N
OTE 24 C OMMITMENTS AND G UARANTEES
E QUITY F UNDING A ND O THER C OMMITMENTS
Our unfunded commitments related to private equity
investments, affordable housing limited partnerships, other
investments, and historic tax credits were $270 million, $98
million, $79 million, and $26 million, respectively, at
December 31, 2007. The amount of other investments at
December 31, 2007 included those related to Steel City Capital
Funding LLC (“Steel City”) as further discussed below.
On March 1, 2007, we entered into a joint venture with a third
party to form Steel City for purposes of purchasing and
originating second lien loans and turnaround loans. Our
primary reason for pursuing this venture was to leverage our
strengths of origination and servicing, provide an additional
product to our customers, and allow for us to moderate the
risks associated with this asset class. Additionally, we will
earn fees for portfolio management services. Steel City is a
limited liability company in which various PNC subsidiaries
hold approximately a 31% equity ownership. At December 31,
2007, our capital contribution to Steel City was approximately
$28 million with a commitment to fund an additional $50
million. The third party investor has contributed $64 million
with a commitment to fund an additional $111 million. We
evaluated the accounting for this transaction under FIN 46R,
Accounting Research Bulletin No. 51 and other appropriate
GAAP and determined that our aggregate investment will be
accounted for under the equity method. This transaction did
not have a material impact on our consolidated results of
operations.
On May 24, 2007, we entered into a joint venture with Vornado
Realty Trust to construct a new headquarters building for the
Washington, DC market. The joint venture closed on
February 14, 2008. We contributed approximately $64 million
in property in exchange for a 51% ownership interest.
S TANDBY L ETTERS OF C REDIT
We issue standby letters of credit and have risk participations
in standby letters of credit and bankers’ acceptances issued by
other financial institutions, in each case to support obligations
of our customers to third parties, such as remarketing
programs for customers’ variable rate demand notes. Net
outstanding standby letters of credit totaled $4.8 billion at
December 31, 2007. If the customer fails to meet its financial
or performance obligation to the third party under the terms of
the contract or there is a need to support a remarketing
program, then upon the request of the guaranteed party, we
would be obligated to make payment to them. The standby
letters of credit and risk participations in standby letters of
credit and bankers’ acceptances outstanding on December 31,
2007 had terms ranging from less than one year to 10 years.
The aggregate maximum amount of future payments we could
be required to make under outstanding standby letters of credit
and risk participations in standby letters of credit and bankers’
acceptances was $7.0 billion at December 31, 2007, of which
$1.8 billion support remarketing programs.
Assets valued as of December 31, 2007 of approximately $.7
billion secured certain specifically identified standby letters of
credit. Approximately $2.3 billion in recourse provisions from
third parties was also available for this purpose as of
December 31, 2007. In addition, a portion of the remaining
standby letters of credit and letter of credit risk participations
issued on behalf of specific customers is also secured by
collateral or guarantees that secure the customers’ other
obligations to us. The carrying amount of the liability for our
obligations related to standby letters of credit and risk
participations in standby letters of credit and bankers’
acceptances was $59 million at December 31, 2007.
S TANDBY B OND P URCHASE A GREEMENTS AND O THER
L IQUIDITY F ACILITIES
We enter into standby bond purchase agreements to support
municipal bond obligations. At December 31, 2007, the
aggregate of PNC’s commitments under these facilities was
$395 million. PNC also enters into certain other liquidity
facilities to support individual pools of receivables acquired
by commercial paper conduits including Market Street. At
December 31, 2007, our total commitments under these
facilities were $9.0 billion, of which $8.8 billion was related
to Market Street.
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