PNC Bank 2008 Annual Report Download - page 43

Assets of Market Street Funding LLC
In millions Outstanding Commitments
Weighted
Average
Remaining
Maturity In
Years
December 31, 2008 (a)
Trade receivables $1,516 $3,370 2.34
Automobile financing 992 992 3.94
Collateralized loan
obligations 306 405 1.58
Credit cards 400 400 .19
Residential mortgage 14 14 27.00
Other 1,168 1,325 1.76
Cash and miscellaneous
receivables 520
Total $4,916 $6,506 2.34
December 31, 2007 (a)
Trade receivables $1,375 $2,865 2.63
Automobile financing 1,387 1,565 4.06
Collateralized loan
obligations 519 1,257 2.54
Credit cards 769 775 .26
Residential mortgage 37 720 .90
Other 1,031 1,224 1.89
Cash and miscellaneous
receivables 186
Total $5,304 $8,406 2.41
(a) Market Street did not recognize an asset impairment charge or experience any
material rating downgrades during 2007 or 2008.
Market Street Commitments by Credit Rating (a)
December 31, 2008 December 31, 2007
AAA/Aaa 19% 19%
AA/Aa 66
A/A 72 72
BBB/Baa 33
Total 100% 100%
(a) The majority of our facilities are not explicitly rated by the rating agencies. All
facilities are structured to meet rating agency standards for applicable rating levels.
We evaluated the design of Market Street, its capital structure,
the Note, and relationships among the variable interest holders
under the provisions of FASB Interpretation No. 46, (Revised
2003) “Consolidation of Variable Interest Entities” (“FIN
46R”). Based on this analysis, we are not the primary
beneficiary as defined by FIN 46R and therefore the assets and
liabilities of Market Street are not reflected in our
Consolidated Balance Sheet.
We would consider changes to the variable interest holders
(such as new expected loss note investors and changes to
program-level credit enhancement providers), terms of
expected loss notes, and new types of risks related to Market
Street as reconsideration events. We review the activities of
Market Street on at least a quarterly basis to determine if a
reconsideration event has occurred.
Based on current accounting guidance, we are not required to
consolidate Market Street into our consolidated financial
statements. However, if PNC would be determined to be the
primary beneficiary under FIN 46R, we would consolidate the
commercial paper conduit at that time. Based on current
accounting guidance, to the extent that the par value of the
assets in Market Street exceeded the fair value of the assets
upon consolidation, the difference would be recognized by
PNC as a loss in our Consolidated Income Statement in that
period. Based on the fair value of the assets held by Market
Street at December 31, 2008, the consolidation of Market
Street would not have had a material impact on our risk-based
capital ratios or debt covenants.
Low Income Housing Projects
We make certain equity investments in various limited
partnerships that sponsor affordable housing projects utilizing
the Low Income Housing Tax Credit (“LIHTC”) pursuant to
Sections 42 and 47 of the Internal Revenue Code. The purpose
of these investments is to achieve a satisfactory return on
capital, to facilitate the sale of additional affordable housing
product offerings and to assist us in achieving goals associated
with the Community Reinvestment Act. The primary activities
of the limited partnerships include the identification,
development and operation of multi-family housing that is
leased to qualifying residential tenants. Generally, these types
of investments are funded through a combination of debt and
equity. We typically invest in these partnerships as a limited
partner.
Also, we are a national syndicator of affordable housing
equity (together with the investments described above, the
“LIHTC investments”). In these syndication transactions, we
create funds in which our subsidiaries are the general partner
and sell limited partnership interests to third parties, and in
some cases may also purchase a limited partnership interest in
the fund. The purpose of this business is to generate income
from the syndication of these funds and to generate servicing
fees by managing the funds. General partner activities include
selecting, evaluating, structuring, negotiating, and closing the
fund investments in operating limited partnerships, as well as
oversight of the ongoing operations of the fund portfolio.
We evaluate our interests and third party interests in the
limited partnerships in determining whether we are the
primary beneficiary. The primary beneficiary determination is
based on which party absorbs a majority of the variability. The
primary sources of variability in LIHTC investments are the
tax credits, tax benefits of losses on the investments and
development and operating cash flows. We have consolidated
LIHTC investments in which we absorb a majority of the
variability and thus are considered the primary beneficiary.
The assets are primarily included in Equity Investments and
Other Assets on our Consolidated Balance Sheet with the
liabilities primarily classified in Other Liabilities and Minority
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