PNC Bank 2008 Annual Report Download - page 145

The following table sets forth regulatory capital ratios for
PNC and its significant bank subsidiaries, PNC Bank, N.A.
and National City Bank.
Regulatory Capital
Amount Ratios
December 31 Dollars in millions 2008 2007 2008 2007
Risk-based capital
Tier 1
PNC $24,287 $ 7,815 9.7% 6.8%
PNC Bank, N.A. 8,338 7,851 7.1 7.6
National City Bank (a) 12,567 10.1
Total
PNC 33,116 11,803 13.2 10.3
PNC Bank, N.A. 12,104 10,616 10.3 10.2
National City Bank (a) 17,208 13.8
Leverage
PNC NM NM 17.5 6.2
PNC Bank, N.A. NM NM 6.3 6.8
National City Bank (a) NM 8.8
(a) Acquired on December 31, 2008.
NM—Not meaningful.
The principal source of parent company cash flow is the
dividends it receives from its subsidiary banks, 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 $351 million at
December 31, 2008. National City Bank had no statutory
dividend capacity as of December 31, 2008.
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, 2008, the balance
outstanding at the FRB was $14 billion.
N
OTE 24 L EGAL P ROCEEDINGS
National City Matters
In December 2008, we completed the acquisition of National
City through the merger of National City into The PNC
Financial Services Group, Inc. As a result, we are now
responsible for litigation pending against National City and its
subsidiaries at that time. We will also be responsible for future
litigation arising out of the conduct of the business of National
City and its subsidiaries before the acquisition.
The lawsuits and other matters described below arise from
National City’s business prior to the merger. We may be
responsible for indemnifying individual defendants in these
lawsuits and other matters.
See also “National City Acquisition-Related Litigation” below
for information regarding litigation filed against PNC and
National City relating to the merger and “Regulatory and
Governmental Inquiries” for information regarding regulatory
matters with respect to National City.
Visa. Beginning in June 2005, a series of antitrust lawsuits
were filed against Visa®, MasterCard®, and several major
financial institutions, including cases naming National City
(since merged into PNC) and its subsidiary, National City
Bank of Kentucky, since merged into National City Bank. The
cases, which were brought as class actions on behalf of all
persons or business entities who have accepted Visa®or
MasterCard®, have been consolidated for pretrial proceedings
in the United States District Court for the Eastern District of
New York. The plaintiffs, merchants operating commercial
businesses throughout the U.S. and trade associations, allege
that the defendants conspired to fix the prices for general
purpose card network services, resulting in the payment of
inflated interchange fees, in violation of the antitrust laws. In
January 2009, the plaintiffs filed amended and supplemental
complaints adding, among other things, allegations that the
restructuring of Visa and MasterCard, each of which included
an initial public offering, violated the antitrust laws. The
plaintiffs seek injunctive relief, actual and treble damages and
attorneys’ fees. National City and National City Bank entered
into judgment and loss sharing agreements with Visa and
other financial institutions with respect to this litigation. On
January 8, 2008, the district court dismissed plaintiffs’ claims
for damages incurred prior to January 1, 2004. This litigation
is also subject to the indemnification obligations described in
Note 25 Commitments and Guarantees. PNC Bank, N.A. is
not named a defendant in any of this litigation nor is it a party
to the judgment or loss sharing agreements but is subject to
these indemnification obligations.
Merrill Lynch. In December 2006, National City Bank
completed the sale of its First Franklin nonprime mortgage
origination and servicing platform to Merrill Lynch Bank &
Trust Co., FSB. By letters dated April 10, 2008 and June 16,
2008, Merrill Lynch notified National City Bank of its
indemnification claim pursuant to the purchase agreement.
141