PNC Bank 2007 Annual Report Download - page 56

PNC Bank, N.A. established a program in December 2004 to
offer up to $3.0 billion of its commercial paper. As of
December 31, 2007, there were no issuances outstanding
under this program.
As of December 31, 2007, there were $5.0 billion of PNC
Bank, N.A. short- and long-term debt issuances with
maturities of less than one year.
Parent Company Liquidity
Our parent company’s routine funding needs consist primarily
of dividends to PNC shareholders, share repurchases, debt
service, the funding of non-bank affiliates, and acquisitions.
Parent company liquidity guidelines are designed to help
ensure that sufficient liquidity is available to meet these
requirements over the succeeding 12-month period. In
managing parent company liquidity we consider funding
sources, such as expected dividends to be received from PNC
Bank, N.A. and potential debt issuance, and discretionary
funding uses, the most significant of which is the external
dividend to be paid on PNC’s stock.
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 or to extend credit to the parent company
or its non-bank subsidiaries. We provide additional
information on these limitations in Note 22 Regulatory
Matters in the Notes To Consolidated Financial Statements
included in Item 8 of this Report and include such information
here by reference. Dividends may also be impacted by the
bank’s capital needs and by contractual restrictions. We
provide additional information on certain contractual
restrictions under the “Perpetual Trust Securities.” “PNC
Capital Trust E Trust Preferred Securities,” and “Acquired
Entity Trust Preferred Securities” sections of the Off-Balance
Sheet Arrangements and VIEs section of this Item 7. 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.
In addition to dividends from PNC Bank, N.A., other sources of
parent company liquidity include cash and short-term investments,
as well as dividends and loan repayments from other subsidiaries
and dividends or distributions from equity investments. As of
December 31, 2007, the parent company had approximately $118
million in funds available from its cash and short-term
investments. During 2007, $1.0 billion of parent company senior
debt was redeemed by the holders, all during the fourth quarter.
We can also generate liquidity for the parent company and
PNC’s non-bank subsidiaries through the issuance of
securities in public or private markets.
• In February 2007, we issued $775 million of floating
rate senior notes due January 2012. Interest will be
reset quarterly to 3-month LIBOR plus 14 basis
points and interest will be paid quarterly.
• Also in February 2007, we issued $500 million of
floating rate senior notes due January 2014. Interest
will be reset quarterly to 3-month LIBOR plus 20
basis points and will be paid quarterly.
• In February 2007, we issued $600 million of
subordinated notes due February 2017. These notes
pay interest semiannually at a fixed rate of 5.625%.
• In June 2007, we issued $500 million of Senior Notes
that mature on June 12, 2009. Interest will be reset
monthly to 1-month LIBOR plus 2 basis points.
These notes are not redeemable by us or the holders
prior to maturity.
• In September 2007, we issued $250 million of senior
notes that mature on September 28, 2012. These
notes pay interest semiannually at a fixed rate of
5.50%.
None of the 2007 issuances described above are redeemable
by us or the holders prior to maturity.
In February 2008, PNC Capital Trust E was formed and issued
$450 million of Capital Securities. Proceeds from the issuance
were used to purchase $450 million of junior subordinated
notes issued by PNC that mature on March 15, 2068 and are
redeemable on or after March 15, 2013 at par. These notes pay
interest quarterly at a fixed rate of 7.75%.
We used the February 2007 issuances described above to fund
a substantial portion of the cash portion of our Mercantile
acquisition.
In the first half of 2007, we elected to redeem all of the
underlying Capital Securities related to the following trusts,
totaling $516 million:
• UNB Capital Trust I ($16 million),
• Riggs Capital Trust II ($200 million), and
• PNC Institutional Capital Trust B ($300 million).
In July 2006, PNC Funding Corp established a program to
offer up to $3.0 billion of commercial paper to provide the
parent company with additional liquidity. As of December 31,
2007, $458 million of commercial paper was outstanding
under this program.
As of December 31, 2007, there were $1.4 billion of parent
company contractual obligations, including commercial paper,
with maturities of less than one year.
We have effective shelf registration statements which enable
us to issue additional debt and equity securities, including
certain hybrid capital instruments.
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